Employment in the private sector rose by 130,000 jobs from September to October, according to payroll giant ADP’s monthly National Employment Report, as the economy contended with uncertainty from the government shutdown.
Along with reporting the 130,000 jobs added in October, ADP revised downward its September job gains from 166,000 to 145,000 jobs, the company said Wednesday (see ADP Sees Private Sector Employment Softening).
In October, small businesses with between one and 19 employees added 35,000 jobs, while those with between 20 and 49 employees gained 2,000 jobs. Midsize businesses with between 50 and 499 employees added 13,000 jobs. Large businesses with between 500 and 999 employees gained 2,000 jobs, while larger companies with 1,000 employees or more added 79,000 positions.
“Small business growth was down from the previous month, while payrolls among large enterprises showed an increase,” said ADP president and CEO Carlos Rodriguez in a statement.
Overall, the service sector added 107,000 jobs, but that was down from 130,000 in September, while the goods-producing sector added 24,000.
Professional and business services, which include accounting and tax preparation along with other types of services, added 20,000 jobs. The construction industry added 14,000 jobs, while the manufacturing industry gained 5,000. The combined trade, transportation and utilities sector added 40,000 jobs. However, on the minus side, the financial activities sector, which includes banking, lost 5,000 jobs.
Mark Zandi, chief economist with Moody’s Analytics, which compiles the monthly employment reports with ADP, pointed out that the 130,000 jobs added in October were below the average monthly gains of roughly 150,000. “October was a weak month,” he said in a conference call with reporters. “My sense is that the job market was weakening going into October. The summer months were soft, probably largely due to the very significant fiscal austerity that the economy is trying to digest. That would include some very significant tax increases and the spending cuts from the sequester. I think that’s been a heavy weight on the economy, and that’s been showing up in the job market over the last several months. The October number, though, probably also was affected by the fallout from the government shutdown and the brinksmanship over the debt limit. It’s hard to know for sure. There’s no proof positive here, but my sense is that the problems in Washington affected hiring, so the rate of hiring probably slowed, and moreover there was some direct impact from furloughs at private sector employers related to the government shutdown and the furloughs in the federal government.”
He sees this trend also borne out in other data, such as initial claims for unemployment insurance rising during the shutdown period. The slowdown hit small businesses especially hard.
“All of the slowdown in job growth in October was among smaller companies, particularly very small companies with less than 50 employees,” said Zandi. “The very big companies—those with over 1,000 employees—showed no slowdown at all, no ill effects. I think that would be consistent with the fallout from the government shutdown. I think that would be most likely to show up in smaller establishments that would be more cautious, for good reason, and have probably curtailed their hiring. The big companies are probably less likely to respond to the shutdown and would continue with business as usual.”
The health care law implementation also may have had an impact on the job market, Zandi noted. “That may be playing a role here, although I think that would be stretching the data, and other data would seem to suggest the health care law is not having much of an impact, at least not so far,” he cautioned. “But it was a soft month, and most of the softness was on the service side of the economy. The goods-producing side—construction and manufacturing—held up pretty well, and I think that augurs well. We need more construction jobs and manufacturing jobs going forward. If that continues to remain firm, the service side of the economy will rev up as we move into next year and the fiscal austerity phase ends, and hopefully Washington is able to reasonably gracefully resolve some of the issues that they’re struggling with right now. It’s clear that the job market has slowed and growth is weak, but it’s not breaking. I don’t think the recovery has been undermined by all the things that are going on, and that does augur well as we move into next year. Hopefully as the fiscal issues begin to recede from the scene, we’ll see a revival of growth.”