ADP jobs report shows 143,000 gain. Cooling U.S. labor market leads to slower wage increases.

By Jeffry Bartash

Big pay hikes are vanishing as hiring tapers off

The numbers: U.S. businesses added a higher-than-expected 143,000 new jobs in September, paycheck company ADP said. Yet it was the sixth straight month in which employment gains totaled less than 200,000 in a sign the labor market has cooled off considerably.

A chillier labor market has overtaken inflation as the Federal Reserve's chief worry. The Fed cut interest rates two weeks ago with inflation slowing and the bank vowed to make more reductions to ensure the labor market doesn't deteriorate much further.

Economists polled by the Wall Street Journal had forecast a gain of 128,000 new jobs in the ADP's September survey.

Key details: The dropoff in hiring has been especially evident in the reduced power of workers to earn higher wages.

Yearly pay increases for people who switch jobs slowed to 6.6% in September from 7.3% in the prior month. Just a few years ago, job switchers earned up to a 16% pay hike when companies were scrambling to hire amid the worst labor shortage in modern times,

"Job stayers" earned an average 4.7% annual increase.

The gap between the two groups, however, shrank to 1.9%, one of the lowest levels since ADP began tracking wages.

"Stronger hiring didn't require stronger pay growth last month," said Nela Richardson, chief economist of ADP.

Most of the new jobs created last month were in construction, leisure and hospitality and health care.

The increase in employment in August was raised to 103,000 from 99,000, but it was still the smallest increase in more than three and a half years.

The ADP report only tracks private-sector hiring. The U.S. jobs report includes government workers.

Economists predict a 150,000 in September employment report produced by the Bureau of Labor Statistics.

Big picture: The red-hot labor market of a few years ago - when wages were surging and workers had leverage over their bosses - is gone.

Since jobs are harder to obtain, workers are quitting at the lowest rate in 11 years if the pandemic years are set aside.

Hiring is unlikely to accelerate much until the Fed cuts interest rates further and lower borrowing costs to juice the economy.

Looking ahead: Like yesterday's job openings total, today's ADP employment number surprised to the upside, suggesting the labor market is bending but not breaking," said Chris Larkin, managing director of trading and investing at E*Trade.

"But Friday's monthly jobs report will have the final word on the current jobs picture, and more than likely, on near-term market sentiment."

Market reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX were set to open lower in Thursday trading. An intensifying conflict between Israel and Iran was among the factors weighing on stocks.

-Jeffry Bartash

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10-02-24 0904ET

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