Here’s How Fed Hikes Have Changed Hiring

Topline

Though private employers continued to hire at a resilient pace last month, early signs indicate the Federal Reserve’s economic tightening campaign has started to hit some industries and slow the pace of wage growth, payroll processor ADP reported Wednesday—but it’s still unclear whether the damage is enough to help the Fed pivot from its aggressive policy.

Key Facts

Boosted by hiring among retailers and the travel sector ahead of the year-end holidays, private employers created 239,000 jobs in October, according to the ADP’s National Employment Report released Wednesday, up from 192,000 in September and coming in much better than the 195,000 jobs economists had forecast.

In a statement, ADP chief economist Nela Richardson said that although the figure shows the labor market remains “really strong,” hiring was not broad-based, with manufacturing firms, which are heavily sensitive to interest rates, losing 20,000 jobs last month, for example.

Other job-losing sectors included financials (down 10,000) and information services (down 17,000), while the leisure and hospitality space added roughly 210,000 new jobs.

Meanwhile, job changers are commanding smaller pay gains, Richardson noted, with annual pay growth among them falling to 15.2% from 15.7% in September.

What To Watch For

The Labor Department’s monthly jobs report, which tracks employment across the public and private sectors, is slated for release Friday morning. Economists forecast the U.S. added 205,000 jobs last month, down from 263,000 in September.

Key Background

After losing more than 20 million jobs at the height of pandemic uncertainty in the spring of 2020, the labor market forcefully led the economic recovery and has remained strong despite other sectors taking a hit as the Fed raises rates. Among the earliest hit, the housing and stock markets have suffered most notably. After surging 27% in 2021, the S&P 500 has plunged nearly 20% this year, and existing home sales have plummeted 24% year over year.

Crucial Quote

“The labor market is still hot amid a slowing economy,” Jeffrey Roach, LPL Financial chief economist, said after the ADP report, forecasting the tight labor market will “complicate things for the Fed” as it debates whether the economy has cooled enough to warrant smaller interest rate hikes.

Further Reading

One Recession Indicator Isn’t Flashing Warning Signs Yet—Here’s Why That May Change (Forbes)

Economy Survives Technical Recession—But Worst Could Come Next Year, Experts Warn (Forbes)