A surprisingly weak private-sector ADP Employment report, released during an ongoing government shutdown, has intensified fears of a looming economic downturn.
Economist Warns Recession Odds Are Not At 0% Level
U.S. private payrolls unexpectedly shed 32,000 jobs in September, a stark reversal from consensus expectations of a 51,000 gain. The losses were driven entirely by small and medium-sized businesses, painting a troubling picture of the U.S. economy.
With the Bureau of Labor Statistics (BLS) suspending its data releases, the ADP report has taken on “outsize influence,” according to Bill Adams, Chief Economist for Comerica Bank. The bleak numbers prompted economist David Rosenberg, the founder and president of Rosenberg Research & Associates Inc., to post on X that “recession odds are not at the 0% level that equity and credit markets have been discounting.”
Small And Medium-Sized Establishments Shed Jobs
The weakness was concentrated among smaller firms. According to the ADP report, small establishments (1-49 employees) lost 40,000 jobs, while medium-sized firms (50-499 employees) cut 20,000 positions. In contrast, large businesses with over 500 employees added 33,000 jobs, highlighting a growing divergence in the labor market.
Compounding the negative outlook was a massive downward revision to the prior month’s data. August’s figures were revised from a 54,000 job gain to a 3,000 job loss, a swing Rosenberg called a “huge downward revision.” After revisions, ADP’s data now shows that private sector employment has fallen in three of the last four months.
See Also: Jobs Shock: Biggest Loss In Over 2 Years And Fed May Cut Again
Federal Reserve Could Continue The Rate-Cutting Cycle
The report is expected to put significant pressure on the Federal Reserve to ease monetary policy. Adams noted that the weak report “makes the Fed more likely to cut the federal funds target another quarter percent at their October meeting.”
This sentiment was echoed by Eric Teal, Chief Investment Officer for Comerica Wealth Management, who described the job market as “stagnant.” He suggested the report should “provide additional information to support more accommodative monetary policy and stimulate the economy and consumption.”
Service Sector Takes The Plunge
Job losses were most severe in the service sector, with leisure and hospitality shedding 19,000 jobs and professional and business services cutting 13,000.
The data adds to a string of concerning economic indicators, including a contracting manufacturing sector, and will be a focal point for markets until official government data becomes available again.
Price Action
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, rose in premarket on Thursday. The SPY was up 0.16% at $669.53, while the QQQ advanced 0.34% to $605.32, according to Benzinga Pro data.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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