ADP Says October Private Jobs Growth Better Than Expected

Nov 3, 2010
This article is part of a series called News & Trends.

The U.S. economy added 43,000 private sector jobs in October, almost twice what economists were expecting.

The news from ADP’s monthly National Employment Report, released this morning, was followed by equally unexpected news from the Commerce Department, which reported that factory orders rose 2.1 percent in September, besting the 1.6 percent predicted by economists.

The reports were overshadowed by the announcement from the Federal Reserve that it would pump some $900 billion into the economy over the next several months, buying $600 billion in long-term Treasury bonds, while reinvesting another $300 million.

Widely anticipated by economists and money managers, the move by the Fed helped stocks reverse course and end the day even to slightly up. The impact of the Fed move will be to free up private cash for other uses, specifically, it is hoped, to invest in business expansion. It should also influence interest rates, keeping them low or driving them even lower.

Announcing its purchase plan, the Fed Board said, in part, “the pace of recovery in output and employment continues to be slow …  employers remain reluctant to add to payrolls.”

The ADP report, drawn from the company’s extensive payroll processing service, supports that view. Most of the new jobs came from small employers. The largest employers actually reduced their payrolls slightly.

Friday, the U.S. Bureau of Labor Statistics issues its report covering all sectors. It is expected to show unemployment remaining at 9.6 percent for the third consecutive month, while jobs grew by 60,000. The BLS report takes into account all jobs, including government employment. ADP counts private sector jobs only.

“Employment gains of this magnitude are not sufficient to lower the unemployment rate,” said Joel Prakken, chairman of Macroeconomic Advisers LLC, which partners with ADP on the report. “Given modest growth in the second and third quarters, and the usual lag of employment behind GDP, it would not be surprising to see several more months of lethargic employment gains, even if the economic recovery gathers momentum.”

Still, the news is an improvement over September when the economy shed 2,000 private sector jobs, according to revised ADP numbers. The BLS numbers, which likely will also be revised in Friday’s report, showed a loss of 95,000 jobs in September, mostly due to government layoffs.

Another indicator, from the Institute for Supply Management, rose to 54.3 in October, up from 53.2 in September. The index is a measure of service sector purchasing. A number above 50 correlates to growth.

The modest increase was matched by equally tepid improvement in consumer confidence and in new job postings, as measured by The Conference Board. The Consumer Confidence Index measured in at 50.2, up from September’s 48.6. The Help Wanted Online Data from The Conference Board showed a second monthly increase in the number of online job postings. There were 113,700 new jobs posted in October. September had an increase of just under 60,000 new postings.

A more comprehensive way of looking at jobs data, The Conference Board’s Employment Trends Index, won’t be released until next week. Down in September for the second consecutive month, the index crunches together the hard data from the BLS, data from the Federal Reserve and other sources, and consumer sentiment. The index now stands at 97.0.

This article is part of a series called News & Trends.