ADP Sees Private Sector Employment Softening

Private sector employment rose by 166,000 jobs in September, according to a report released Wednesday by payroll giant ADP, indicating a continuing slowdown in recent months in job gains across the still fragile economy.

Some sectors saw a decrease of jobs, including the financial activities sector, which posted a loss of 4,000 jobs. In contrast, the professional and business services sector, which includes accounting and tax preparation, among other services, experienced a gain of 27,000 jobs.

Small businesses with between one and 19 employees gained 46,000 jobs in September, while those with 20 to 49 employees added 28,000 jobs. Midsize businesses with 50 to 499 employees also added 28,000 jobs, according to ADP.

Large businesses with between 500 and 999 employees added a modest 5,000 jobs, while larger companies with 1,000 employees or more posted 59,000 more jobs.

The service sector, as usual, led the way in job gains, with 147,000 jobs added in September (but that was down from the 152,000 jobs reported in August), compared to just 19,000 jobs in the goods-producing sector.

On an industry basis, the construction industry added 16,000 jobs, while the manufacturing industry only accounted for 1,000 more jobs in September, according to ADP. The combined trade, transportation and utilities industry gained 54,000 jobs.

“Job growth in the last few months has been on the soft side,” said Mark Zandi, chief economist of Moody’s Analytics, which compiles the reports with ADP. “The job gains are fairly broad based across industries.”

But he noted that fiscal austerity has begun to take a toll on job creation, and the run-up in interest rates may also be doing some damage to jobs in the financial services industry. Mortgage finance companies have begun laying off employees as mortgages become less attractive to homeowners.

“While job growth has slowed, there remains a general resilience in the market,” Zandi added. “Job creation continues to be consistent with a slowly declining unemployment rate.”

In a conference call with reporters Wednesday, Zandi noted that leisure and hospitality employment appeared to be softening, but the construction industry was a bright spot. “Smaller companies are adding jobs, much like they’ve done in the past year,” he pointed out.

Zandi said the ADP numbers showed little impact from health care reform on the job market. However, he acknowledged that he had heard anecdotally from many business leaders that uncertainty and frustration over the law had dampened their hiring plans. “The script is still being written,” he added. “Job growth may have been stronger if not for the health care law.”

The current showdown in Congress over the federal budget and the government shutdown in the battle over delaying Obamacare have not yet had an impact on the employment numbers. But Zandi believes it could have a large impact if the federal government shutdown drags on into next week, and lawmakers are unable to reach an agreement. If the federal government shutdown starts to affect the stock and bond markets, there will be added pressure on Congress and the administration to reach a deal. And if the showdown continues over raising the debt limit, Zandi believes there could be a big hit to the economy and major job losses. “They will open a Pandora’s box,” he predicted.

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