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September private payrolls rose by 568,000, topping estimates: ADP

·3 min read

U.S. private employers added back more jobs than expected in September as COVID-19 cases moderated from a summer peak and alleviated some stress on the labor market.

Private payrolls grew by 568,000 last month, ADP said in its closely watched monthly report on Wednesday. Economists were looking for private payrolls to grow by 430,000, according to Bloomberg consensus data. During the prior month, private-sector jobs had risen by 340,000. This figure was downwardly revised from the 374,000 previously reported for August.

Wednesday's report reflected an acceleration in hiring in the U.S. services sector, with 466,000 net payrolls coming back last month. The biggest contributor to this figure, in turn, came from leisure and hospitality industries, with employers across these firms adding back 226,000 jobs. Job gains in education and health services, and professional and business services, each also came in above 60,000.

The goods-producing sector also saw a strong pick-up in hiring, with payroll gains rising by 102,000 to more than double the number of jobs brought back in August. Manufacturing and construction jobs each rose by nearly 50,000.

Wednesday's report marked a ninth consecutive month of private payroll growth in the U.S. economy, with the labor market making strides to recoup jobs lost over the course of the pandemic. Other reports have also underscored some firming trends in domestic employment: Both the Institute for Supply Management's manufacturing and service sector employment indexes held in expansionary territory in September, and weekly unemployment claims dropped to a pandemic-era low at the start of the month.

"Bottom line, labor demand remains exceptionally strong, and with COVID cases seemingly to have peaked early last month, we expect the pace of hiring to have come more in line with its recent trend," Sam Bullard, senior economist for Wells Fargo Corporate and Investment Banking, wrote in a note.

SAN FRANCISCO, CALIFORNIA - SEPTEMBER 16: A pedestrian walks by a now hiring sign at a Lamps Plus store on September 16, 2021 in San Francisco, California. Unemployment claims inched up to 332,000 from a pandemic low of 312,000 a week before. (Photo by Justin Sullivan/Getty Images)
A pedestrian walks by a now hiring sign at a Lamps Plus store on September 16, 2021 in San Francisco, California. (Photo by Justin Sullivan/Getty Images)

ADP's private payrolls report also sets the tone for the Labor Department's "official" September jobs report on Friday. In that report, economists are expecting to see an acceleration in payroll gains after a sharply disappointing August jobs report, when just 235,000 jobs returned versus the more than 700,000 expected at the time. The consensus estimate for non-farm payrolls gains in September is 488,000.

Many economists have warned that ADP's report does not serve as a precise indicator of payroll trends seen in the government data due to differences in methodology. ADP counts active employees on company payrolls toward its headline figure, while the Labor Department counts those paid during the survey period towards its non-farm payrolls increase or decrease.

One of the biggest discrepancies between the ADP private payrolls report and Labor Department jobs report last month was over service sector job growth. ADP reported that 201,000 leisure and hospitality jobs came back in August, whereas the Bureau of Labor Statistics' report reflected zero.

"We would not be surprised to see the BLS revise its August estimate for this sector, which despite last month's pause accounted for 51% of the roughly 4.1 million private-sector job gains year-to-date," Deutsche Bank senior U.S. economist Brett Ryan wrote in a note.

The Labor Department is set to report its monthly jobs report Friday at 8:30 a.m. ET.

This post is breaking. Check back for updates.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck