Has The Job Market Hit Bottom? Private Payroll Growth Rebounded In September

Key Takeaways

• Private employers added more jobs than expected in September, a fresh sign of life in a labor market that has grown stagnant.
• Federal Reserve officials are monitoring the job market closely as they determine the nation's monetary policy.
• Slowdowns in the job market could pressure the Fed to cut interest rates faster to boost the economy and prevent job losses, while a healthy job market could mean higher interest rates for longer.

The job market may be showing fresh signs of reversing its recent slump.

Private employers added 143,000 jobs in September, up from 103,000 in August, private payroll provider ADP said Wednesday. It was the first time since March that job growth has accelerated and exceeded forecasters' estimates, who had expected employment to increase by 128,000, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal. 

Should the acceleration of job growth be mirrored in an official government report due Friday, it could mark a turning point in a labor market that has ground to a virtual standstill amid high interest rates for all kinds of loans throughout the economy. In August, hiring, quitting, and layoffs were all well below historical averages, according to a separate government report Tuesday, as employers showed little appetite for hiring but also resisted downsizing.

What a Rebound Could Do For the Federal Reserve

Financial markets and Federal Reserve officials are especially scrutinizing the job market.

Fed officials are cutting the central bank’s influential federal funds rate in hopes of boosting the economy and preventing the job market from deteriorating to the point where unemployment rises severely. Any signs of a slowdown in the job market could pressure the Fed to cut rates faster. Conversely, data showing a healthy job market could allow the Fed to cut rates more slowly.

The ADP payroll data is an early indicator of how the job market is doing, since it comes out a few days before the Bureau of Labor Statistics releases its official monthly report. However, economists typically take the ADP numbers with a grain of salt, since they don’t always reliably predict the trends in the official figures.

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