Source: Sharecast
Employment declined by 32,000 from August, versus expectations for a 45,000 increase. Meanwhile, the August figure was revised to show that 3,000 jobs were lost rather than 54,000 created.
Small businesses with fewer than 50 employees shed 40,000 jobs, while medium businesses with between 50 and 499 employees lost 20,000 jobs.
Large business with more than 500 employees added 33,000 jobs.
The service sector saw a 28,000 drop in jobs, while the goods-producing sector shed 3,000 jobs.
The data also showed that year-over-year pay growth for job-stayers was little changed in September at 4.5%. Pay gains for job-changers slowed to 6.6% from 7.1% in August, led by leisure and hospitality and financial activities.
Nela Richardson, chief economist at ADP, said: "Despite the strong economic growth we saw in the second quarter, this month's release further validates what we've been seeing in the labour market, that US employers have been cautious with hiring."
Kathleen Brooks, research director at XTB, said the ADP report is another sign that the US labour market is losing steam.
"This one is worrying, it is the third time in four months that the private sector has shed jobs, which comes after a boom in service sector jobs growth post Covid.
"If the service sector is going into reverse when it comes to hiring, then the labour market picture in the US could deteriorate sharply from here."
Brooks said the immediate market impact from this news is a recalibration of interest rate cut expectations from the Federal Reserve.
"The Fed Fund Futures market now expects more than a 100% chance of a rate cut later this month," she said.
"There is also a small chance of a 50bp cut being priced in. There are 4.3 cuts priced in between now and October 2026, this compares to 3.9 cuts priced in by the market on Tuesday. Thus, the weakness in the ADP report is triggering a dovish reassessment of where investors see US interest rates in the coming year.
"US Treasury yields are falling sharply after the ADP report, and this is weighing on the dollar, which has made fresh lows of the day. US stocks are expected to open lower, as the government shutdown weighs on sentiment. However, there is now another risk to contend with: a rapidly slowing labour market alongside the shutdown, which could keep sentiment subdued for the coming days."
