Photo by Annie Spratt


Economists are often tasked with predicting forthcoming economic data, using a variety of models and methods. While they don't have a crystal ball, their consensus forecasts are often quite accurate. However, this was not the case with the recent ADP private sector jobs data report, which showed that US employers added an estimated 89,000 private-sector jobs in September, falling short of economists' expectations of 153,000 new hires.

Looking behind the headline number, the leisure and hospitality sector continued to lead job growth, with an estimated 92,000 positions added during the month. However, the largest declines were seen in professional and business services, trade, transportation and utilities, and manufacturing, according to ADP. Large businesses with 500 or more employees drove the decline, losing 83,000 jobs.

Zooming out, ADP's latest report suggests that the labor market is cooling down as fewer people are getting hired. However, data from the Bureau of Labor Statistics' Job Openings and Labor Turnover Survey report for August showed the opposite, with the number of available jobs unexpectedly increasing. This seemingly contradictory data highlights the fact that there are multiple ways of looking at the labor market, and why economists at the Federal Reserve take into account multiple different reports on the state of the labor market.

The Bureau of Labor Statistics is set to release the all-important monthly jobs report for September at 8:30am ET on Friday. Economists are expecting a net gain of 170,000 jobs, according to a consensus estimate of economists polled by Refinitiv.

Despite the discrepancy between the ADP report and the Job Openings and Labor Turnover Survey report, it's important to note that both reports provide valuable insights into the state of the labor market. The ADP report is based on actual payroll data from a subset of US businesses, while the Job Openings and Labor Turnover Survey report provides a more comprehensive view of the labor market, including data on job openings, hires, and separations.

The Federal Reserve closely monitors the labor market as part of its mandate to promote maximum employment and stable prices. In addition to the ADP and Job Openings and Labor Turnover Survey reports, the Fed also looks at other indicators such as the unemployment rate, average hourly earnings, and labor force participation rate.

The unemployment rate, which measures the percentage of the labor force that is unemployed but actively seeking work, has been steadily declining since the peak of the COVID-19 pandemic in April 2020. In August 2021, the unemployment rate was 5.2%, down from a high of 14.8% in April 2020. However, the unemployment rate only tells part of the story, as it doesn't account for people who have dropped out of the labor force altogether or who are underemployed.

Average hourly earnings, which measures the average wage paid to workers per hour, has been increasing in recent months as employers compete for workers in a tight labor market. In August 2021, average hourly earnings for all employees on private nonfarm payrolls rose by 17 cents to $30.73, following an increase of 30 cents in July.

The labor force participation rate, which measures the percentage of the population that is either employed or actively seeking work, has been relatively stable in recent months. In August 2021, the labor force participation rate was 61.7%, up slightly from 61.4% in April 2020 but still below pre-pandemic levels.

Overall, the state of the labor market remains a key concern for policymakers and economists alike. While the ADP report may have fallen short of expectations, it's important to look at a range of indicators to get a comprehensive view of the labor market. The upcoming monthly jobs report from the Bureau of Labor Statistics will provide further insights into the state of the labor market and help guide policymakers in their decisions.