Private Employers Add 38,000 Jobs, Missing Expectations
Private employers added about 38,000 workers in August, the smallest increase since January. Economists had expected a gain of 47,000 jobs.
Private employers added about 38,000 workers in August, the smallest increase since January. Economists had expected a gain of 47,000 jobs. The miss was not huge, but it was a miss. And misses add up.
The ADP report on private sector job growth for August comes ahead of the official Bureau of Labor Statistics jobs report scheduled for release on Friday. That is the one that moves markets. This one is a preview. Previews matter when they hint at what the main feature might look like.
I have spent thirty years watching markets. You learn to count the money twice. You also learn to notice what an announcement is timed to hide. This report was released on Wednesday morning. Quiet. No fanfare. Just a number and a press release. The kind of number that makes you pause before you hit the buy button.
The job growth was concentrated mainly in education and health services, and leisure and hospitality. These are not the sectors that drive productivity gains. They are labor intensive. They do not scale the way tech or manufacturing does. And they do not pay the kind of wages that fuel consumer spending at the margin.
Bigger companies with 500 employees or more accounted for about 34,000 of the new jobs. That is almost all of them. Small businesses did not hire. Medium businesses did not hire. The big ones did. This is not a broad based recovery. This is a narrow one. And narrow recoveries are fragile.
Manufacturing lost jobs. Professional and business services lost jobs. Trade, transportation, and utilities lost jobs. These are the sectors that usually lead when the economy is firing on all cylinders. They are not leading now. They are lagging. And that tells you something about where we are in the cycle.
I remember 2000. I remember 2008. The patterns do not repeat exactly, but they rhyme. And this rhymes with the late stages of a cycle. When the big companies are still hiring but the small ones are not. When the growth is concentrated in a few sectors but missing everywhere else. When the numbers are positive but the momentum is fading.
The Bureau of Labor Statistics report on Friday will include government employment. That could add a few thousand jobs. But the private sector is the engine. And the engine is sputtering. Not stalled. Not yet. But sputtering.
Investors will watch Friday’s report closely. The Federal Reserve will watch it even more closely. Rate decisions depend on labor market data. And this data suggests the labor market is cooling. Not collapsing. Cooling. There is a difference. But cooling is not what you want to see when rates are already high and debt is already expensive.
Wage growth is another piece of this puzzle. Job switchers saw their base wages increase by 4.7 percent year over year. Those who stayed put saw wages rise by 3 percent. That is a gap. And gaps like that can narrow in two directions. Either the stayers catch up, or the switchers slow down. Neither outcome is great for inflation hawks.
The market wants clarity. It does not want rhymes. It wants facts. And the facts here are mixed. Jobs were added. But fewer than expected. The growth was real. But narrow. The big companies hired. The small ones did not. This is not a story of strength. It is a story of caution.
I do not shout. My doubt comes out in short flat sentences. And my sentence on this is simple. The labor market is not breaking. But it is not strong either. It is somewhere in between. And that somewhere is where the Fed makes its mistakes.
Friday will tell us more. But Wednesday already told us enough. The momentum is fading. The breadth is narrow. The engine is sputtering. And when the engine sputters, you do not lean into the turn. You ease off the gas. You watch. You wait. You count the money twice.
The official BLS report is due Friday at 8:30 a.m. ET. It will include public sector hiring. It will revise the prior months. It will give us the unemployment rate. It will give us the participation rate. It will give us the full picture. Or as full as a monthly snapshot can be.
Until then, we have this. A miss. A narrow gain. A sputtering engine. And a Fed that is watching every tick. The market does not like uncertainty. But it likes false certainty even less. And this report gives us neither. It gives us data. And data is what we have to work with.
I am not making a call. I am not calling a top. I am not calling a bottom. I am just reading the tea leaves. And the tea leaves say caution. Not panic. Not euphoria. Caution. The kind of caution that keeps you in the game when the game turns.