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U.S. Economy Continues to Add Jobs Slowly

All signs point to a U.S. jobs market that is recovering, albeit slowly.

Blog-U.S Economy-1On Friday, the Labor Department reported that the economy added 661,000 jobs in September, suggesting the labor market's recovery from the coronavirus pandemic is beginning to plateau amid fading government relief money and a gradually widening virus caseload. The unemployment rate fell to 7.9% from 8.4%.

Several large employers, however, have recently warned of or made, job cuts. Disney laid off 28,000 workers, mostly at its two U.S. theme parks. United and American Airlines sent furlough notices to 32,000 employees on Wednesday after federal COVID aid expired, and Royal Dutch Shell said it planned to cut between 7,000 and 9,000 jobs by the end of 2022.

Earlier in the week, the September ADP National Employment Report reported that private-sector employment increased by 749,000 jobs from August to September.

The ADP report which is published monthly by the ADP Research Institute with Moody’s Analytics, is based on active and paid employees on company payrolls. The Labor Department’s Bureau of Labor Statistics (BLS) counts workers as employed if they received a paycheck during the week that includes the 12th of the month.

“The labor market continues to recover gradually,” said Ahu Yildirmaz, Vice President and Co-Head of the ADP Research Institute. “In September, the majority of sectors and company sizes experienced gains with trade, transportation and utilities and manufacturing sectors leading the way. However, small businesses continued to demonstrate slower growth.”

While the gain could be viewed as good news for a labor market as businesses continue to hire in industries where demand is growing, ADP’s measure of private employment is still more than 10 million below its pre-pandemic level. The persistent spread of the coronavirus remains a challenge, while a stalemate over federal aid for businesses and the unemployed is limiting momentum in the economy.

The ADP report breaks down Total U.S. Nonfarm Private Employment by Sector and Company Size. All are worth reviewing each month (and tracking in a time series) to get a complete picture of what's happening and how job market conditions are trending in your business sector. Here are the highlights:

Large Employers Lead on Hiring
Large and mid-sized businesses hired the most new workers in August, with bigger businesses (1,000+ employees) leading the way at 222,000 new jobs. Mid-sized businesses (50-499 employees) added 259,000, while businesses with 500-999 employees contributed another 75,000.  Small businesses (1-49 employees) added 192,000 jobs.

Jobs are with Services Companies
The service-providing sector added 552,000 jobs in August with the jobs coming from the trade/transportation/utilities (186,000), healthcare/social assistance (101,000) and professional/business services (78,000) sectors. The education sector saw a loss of 11,000 jobs in August.

Manufacturing Shows Gains as Well
The goods-producing sector added 196,000 jobs to the economy, led by a boost in manufacturing of 130,000 jobs. Construction created 60,000, with natural resource/mining growing by 7,000.

Bullish about Manufacturing

The nation’s procurement executives who keep a close watch on the economy each month reported on October 1 that the manufacturing sector grew in September for the fifth consecutive month.

The Institute for Supply Management’s Manufacturing Index registered 55.4%, which is down slightly from 56.0% in August, marking PMI’s highest level of expansion since November 2018. Readings above 50% indicated expansion in manufacturing while readings above 42.8%, over time, indicate expansion in the overall economy.

The ISM’s Manufacturing Employment Index improved to 49.6% in September, up from 46.4% in August. An Employment Index above 50.8%, over time, is generally consistent with an increase in the Bureau of Labor Statistics data on manufacturing employment.

While long-term labor market growth remains uncertain, strong new-order levels and an expanding backlog signify potential employment strength for the fourth quarter, said Timothy Fiore, Chair of the ISM’s Manufacturing Business Survey Committee. “Survey panelists’ comments indicate that there are significantly more companies hiring or attempting to hire than those that are reducing labor forces.”

According to the ADP National Employment Report, franchise employment grew in August by 20,700 jobs. 

The matched sample used to develop the ADP National Employment Report was derived from ADP payroll data, which represents 460,000 U.S. clients employing nearly 26 million workers in the U.S. The August total of jobs added was revised from 428,000 to 481,000.

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