Drop in COVID-19 infections increases private payrolls in the United States in September By Reuters

By Lucia Mutikani

WASHINGTON (Reuters) – Private payrolls in the United States rose more than expected in September as COVID-19 infections began to decline, boosting hiring at restaurants and other high-contact businesses.

ADP’s national employment report released on Wednesday confirmed expectations of a pickup in job growth last month, although it has a poor track record in predicting the number of private wages in the report. on the fuller and more closely supervised employment of the Ministry of Labor.

The September jobs report due on Friday will garner more attention after the Federal Reserve signaled last month that it would likely start cutting its monthly bond purchases as early as November. Fed Chairman Jerome Powell believes the economy is a “decent” monthly jobs report that falls short of the threshold set by the US central bank to cut its bond buying program.

“It looks like the job gain will be called ‘decent’,” said Paul Ashworth, chief economist at Capital Economics in Toronto. “Nonetheless, it’s worth remembering that the ADP’s first estimate is not a particularly good predictor of official payroll.”

Private payrolls increased by 568,000 jobs last month, according to ADP’s national employment report. Data for August has been revised down to show 340,000 jobs added instead of the 374,000 originally reported. Economists polled by Reuters had predicted that the private wage bill would increase by 428,000 jobs.

Employment gains averaged 410,000 jobs in the third quarter, a slowdown from the second quarter average of 748,000. The leisure and hospitality industry last month added 226,000 jobs after have created 155,000 jobs in August.

Manufacturing payrolls increased by 49,000 jobs, while hiring on construction sites also increased by 49,000. Job gains in other sectors were modest. Large firms accounted for the bulk of job creation, followed by medium-sized firms. Small business hiring increased by 63,000 jobs after increasing by 61,000 in August.

The ADP report is jointly developed with Moody’s (NYSE 🙂 Analytics. It has a poor track record in predicting the number of private wages in the department’s Bureau of Labor Statistics (BLS) employment report due to methodological differences.

Stocks on Wall Street fell as the ADP report stoked fears the Fed would tighten monetary policy sooner than expected. The dollar appreciated against a basket of currencies. US Treasury prices were higher.

Graphic: ADP, https://graphics.reuters.com/USA-STOCKS/byvrjlzjqve/adp.png

RISE IN MORTGAGE RATES

Expectations that the Fed will soon begin withdrawing some monetary support from the economy has pushed mortgage rates higher, hurting refinancing activity and demand for home purchase loans. A Mortgage Bankers Association report released on Wednesday showed mortgage applications fell 6.9% last week from the week before.

Refinancing requests fell 9.6% from the previous week and 16% from a year ago. Applications for loans to buy a home are down 1.7% from last week. The 30-year fixed mortgage rate rose four basis points to 3.14% last week, the highest since July.

Graphic: MBA, https://graphics.reuters.com/USA-STOCKS/zgpombqmrpd/mba.png

The recovery in the private wage bill suggests that economic expansion remains on track even as gross domestic product growth appears to have slowed sharply in the third quarter due to the resurgence of COVID-19 infections in the summer and relentless shortages that have undermined sales of motor vehicles.

The Atlanta Fed forecasts that GDP growth slowed to an annualized rate of 1.3% during the July-September quarter. The economy grew at a pace of 6.7% in the second quarter.

“Stronger job growth in September could indicate that the drag on hiring due to the recent surge in coronavirus cases is fading,” Gus Faucher, chief economist at PNC Financial (NYSE 🙂 told Pittsburgh, Pennsylvania.

According to a Reuters survey of economists, non-farm payrolls probably increased by 473,000 jobs in September. The economy created 235,000 jobs in August, the least in seven months. Estimates range from 700,000 jobs to 250,000. The unemployment rate is expected to drop to 5.1% from 5.2% in August.

But labor market indicators were mixed in September. A Conference Board poll last week showed that consumer views on current labor market conditions have softened.

The number of people on the state’s unemployment lists declined in mid-September compared to mid-August. The Institute for Supply Management’s measure of manufacturing employment rebounded last month after contracting in August. But the ISM’s service sector employment gauge sagged, with companies reporting that “labor shortages (were) experienced at all levels.”

The economy is experiencing a severe labor shortage as the pandemic has forced some people to quit their jobs to become caregivers. Others are reluctant to return for fear of contracting the virus, while some have retired or are looking to change careers.

There was a record 10.9 million vacancies at the end of July. Economists are cautiously optimistic that the labor shortage will begin to ease in the fall and winter after federally funded unemployment benefits expire in September, which businesses and Republicans have blamed it for the labor shortage.