Job Growth in Private Sector Slows To Lowest Pace In Almost Three Years

The number of new jobs in the private sector of the U.S. had the smallest gain since January 2021, signaling a slowdown in the labor market.

New jobs in September totaled 89,000 or about half of the 180,000 of August, payroll processing company ADP said in a statement Wednesday.

Economists surveyed by Reuters expected an increase of 153,00 last month. The figure for August was slightly revised upwards from 177,000.

The report also showed that annual pay rose 5.9% in September from a year earlier, the 12th consecutive month of slowdown.

"We are seeing a steepening decline in jobs this month," said Nela Richardson, chief economist for ADP said. "Additionally, we are seeing a steady decline in wages in the past 12 months."

ADP captures data from the payroll of its clients, with a cohort of almost 10 million workers, to show a picture of the private job market in the U.S.

The report comes two days before the release of the monthly Labor Department's job report, which is the most-expected economic data this week. Economists surveyed by Reuters estimate that total nonfarm payrolls rose by 170,000 last month from 187,000 in August.

A slowdown in the job market could provide an argument for the Federal Reserve to suspend its interest-rate hiking cycle. The Fed maintained the US benchmark rate in the range of 5.25% to 5.50% on Sept. 20, the highest level in 22 years.

Projections in the Fed's dot plot, which accompanied the announcement, showed the likelihood of one more hike this year. Officials from the Fed have also signaled in speeches in the past week that another increase will be needed this year to fight inflation.

The core Personal Consumption Expenditure (PCE) index, which is closely followed by policy makers to decide on interest rates, rose 3.9% in the 12 months through August, from 4.3% in July. Despite the slowdown, the measure is still way above the Fed's target annual inflation of 2%.