Despite a seemingly strong October jobs report by payroll firm ADP, a spike in the service sector overshadowed broad weakness in hiring, CNBC reported Wednesday.
Private companies gained 239,000 jobs overall in October, with the service sector gaining 247,000 jobs as the goods-producing sector declined by 8,000 jobs, ADP reported Wednesday. The overwhelming majority of jobs came from leisure and hospitality, which gained 210,000 jobs, and declines in manufacturing, which saw a cut of 20,000 jobs, alongside professional services, information and financial activities signaled that economic conditions were broadly weaker than overall job growth might indicate, CNBC reported.
“The manufacturing sector often sees employment declines before the broader market,” Heritage Foundation economist E.J. Antoni told the Daily Caller News Foundation. Antoni noted that consumer spending, which comprises roughly two-thirds of GDP according to the Federal Reserve Bank of St. Louis, could decline as layoffs spread from manufacturing to other sectors, setting the stage for a weakened gross domestic product in the fourth quarter of 2022.
Manufacturers saw the slowest production growth in 28 months as demand for new orders fell at the fastest rate since May 2020, shifting focus to clearing the backlog of current orders, S&P Global reported in its October U.S. Producer Manufacturing Index (PMI). Although the inflationary pressure on input costs was declining, lowered demand was a significant contributing factor to this.
210,000 of the jobs in the ADP report were in leisure and hospitality with most other categories declining. pic.twitter.com/ZWzrwW6Nxt
— ForexLive (@ForexLive) November 2, 2022
“Confidence in the outlook waned as underlying data also highlighted efforts to cut costs and adjust to more subdued demand conditions in the coming months,” said Siân Jones, Senior Economist at S&P Global Market Intelligence, in the report. “Input buying fell sharply and resilience in employment stumbled, as the pace of job creation eased to only a marginal rate.”
ADP’s chief economist, Nela Richardson, was more optimistic than Antoni in the company’s press release, describing job growth as a “really strong number given the maturity of the economic recovery.” Richardson did note that hiring was not broad-based, but that slowdowns mostly affected companies that were most pressured by the Federal Reserve’s campaign of interest rate hikes, intended to combat inflation.
“Goods producers, which are sensitive to interest rates, are pulling back, and job changers are commanding smaller pay gains,” Richardson said. “While we’re seeing early signs of Fed-driven demand destruction, it’s affecting only certain sectors of the labor market.”
The Federal Reserve is expected to hike interest rates again at a Wednesday policy meeting, CNBC reported.
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