U.S. September ADP Employment Rises by 90,000, Far Exceeding Expectations; Nonfarm Payrolls Report Faces Key Test

ADP Research data released on Wednesday showed that U.S. private sector employment rose by 90,000 in September, the largest increase in three months and above market expectations, indicating that the labor market has reaccelerated after a brief slowdown, further easing market concerns about an economic cooldown. Specifically, September payrolls rose by 90,000, far exceeding the downwardly revised 36,000 in August. In terms of market expectations, the median estimate of economists surveyed was 75,000, while the Dow Jones consensus forecast was 68,000, with the actual figure clearly beating both. The ADP report is based on payroll data covering more than 26 million U.S. private-sector employees and is regarded as an important precursor to Friday's nonfarm payrolls report. From an industry perspective, job growth was broad-based but uneven. Education and health services contributed the most, adding 55,000 positions, accounting for more than half of the overall increase. Leisure and hospitality added 22,000, manufacturing added 17,000, and construction added 15,000, all posting solid gains. The service sector as a whole added 59,000, while goods producers contributed 31,000, reflecting a relatively balanced structure. However, some industries saw layoffs. Financial activities shed 16,000 positions, professional and business services lost 11,000, and natural resources and mining declined by 1,000. By region, the Northeast stood out, adding 56,000 jobs. By firm size, companies with 50 to 499 employees added 54,000, indicating relatively strong hiring willingness among mid-sized businesses. On pay, the ADP report showed that job-changers' total pay rose 7.3% year over year, while pay for job-stayers increased 4.4%. Overall base pay rose 3.2% year over year, while total pay growth accelerated to 4.7%. ADP Chief Economist Nela Richardson said in a statement: "This was a strong report. After three months of slowing, job creation rebounded and pay growth remained solid." The report further corroborated recent comments from several Federal Reserve officials that, after the 2025 growth scare, the labor market is basically solid and moving toward balance. A stable job market, combined with resilient consumer spending, has allowed the Fed to focus its policy attention on fighting persistent inflation. The Fed raised its benchmark borrowing rate by 25 basis points earlier in September, the first rate hike since 2023. Since then, several policymakers have described the labor market as "solid and in balance," and believe the bigger policy risk now is sticky inflation rather than employment weakness. Market attention has now turned to Friday's government nonfarm payrolls report. That report includes public-sector hiring, and the Wall Street consensus expects 84,000 jobs added in September, down from 162,000 the previous month, with the unemployment rate expected to hold steady at 4.1%. Some institutions expect the government report to show about 90,000 jobs added, echoing the ADP data. Overall, the September ADP report painted a picture of a stabilizing labor market: rebounding hiring, steady pay, and an economy that is mixed by industry but broadly healthy. Although financial activities and professional services saw layoffs, strong growth in education and health, leisure and hospitality, and manufacturing was enough to offset the impact. The data help ease market fears of an economic stall and also support the Fed in maintaining a tightening bias against the backdrop of still-sticky inflation. As the nonfarm payrolls report approaches, the true resilience of the labor market will face further scrutiny.