Private payrolls rose 42,000 in October, more than expected and countering labor market fears, ADP says

Payroll growth at private companies turned slightly stronger than expected in October, providing some hope that the labor market isn't in danger of sinking, ADP reported Wednesday.

Companies added 42,000 jobs for the month, following a decline of 29,000 in September and topping the Dow Jones consensus estimate for a gain of 22,000. A revision for September showed 3,000 fewer jobs lost, the payrolls processing firm said.

A gain of 47,000 in the trade, transportation and utilities grouping helped offset losses in multiple other categories. Education and health services also showed growth of 26,000 while financial activities added 11,000.

Despite the artificial intelligence-fueled tech boom, information services saw a decline of 17,000 positions. Other sectors posting losses included professional and business services (-15,000), other services (-13,000) and manufacturing (-3,000), a sector that continues to struggle despite President Donald Trump's tariffs aimed at bringing factory jobs back to the U.S.

All of the job creation came from companies employing at least 250 workers. That category added 76,000 jobs, while smaller businesses lost 34,000. The trend away from job growth at at small businesses is significant, considering they are responsible for three of every four jobs, ADP chief economist Nela Richardson said.

“While big companies make headlines, small companies drive hiring,” Richardson said on CNBC. “So to see that weakness at the small-company level is still a concern, and I think that's one of the reasons why the recovery has been so tepid.”

Despite the meager job growth, salaries continued to rise. Year-over-year pay for those staying in their jobs rose 4.5%, the same as in September, while job switchers saw a 6.7% increase, up slightly from a month ago.

Private employers added jobs in October for the first time since July, but hiring was modest relative to

what we reported earlier this year,“ Richardson said. ”Meanwhile, pay growth has been largely flat for more than a year, indicating that shifts in supply and demand are balanced.

By ADP's count, job growth has averaged about 60,000 a month. However, that has tailed off significantly in the second half of the year.

The ADP count comes out the first Wednesday of the month and usually takes a back seat to the Bureau of Labor Statistics' official nonfarm payrolls report released two days later. However, because of the history-making government shutdown, the BLS, like all other government agencies, has suspended data collection and releases.

Had the BLS report been released, Wall Street was looking for it to show a drop of 60,000 jobs and a rise in the unemployment rate to 4.5%.

Federal Reserve officials have expressed concern over the state of the labor market, saying it has overtaken for now the central bank's attention toward inflation running above the 2% target. The Fed at its meeting last week approved a quarter percentage point reduction in its key interest rate, which now is targeted between 3.75%-4%.

Though the BLS has gone dark, officials will get a look at other data this week.

Challenger, Gray & Christmas on Thursday releases its monthly look at announced layoffs, while economists will watch state-level jobless claims for a look at whether companies are shrinking payrolls. The University of Michigan on Friday also will release its monthly sentiment index which provides snapshots of how consumers feel about broader economic conditions. Recent data from jobs site indeed show employment postings at their lowest since February 2021.