The labor market is growing just enough to keep conditions stable—50,000 jobs per month is all that is needed to maintain stability in today’s economy—yet, it is clear that the hiring is coming from large firms.
Small and medium-sized firms, at the same time, are pulling back as weaker demand down market and pervasive uncertainty from the policy sector have taken a toll.
The labor hoarding that has characterized the domestic workforce over the past few years has now reached its endpoint.
As firms invest immense sums of capital into productivity-enhancing technology, it is natural that these entities will want to put those capabilities to work, which is leading to layoffs on the margins.
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The ADP private sector employment estimate for October released on Wednesday showed a gain of 42,000 jobs, with service-providing firms adding 33,000 and goods-producing firms adding 10,000 positions.
But small firms cut 10,000 jobs—the third straight month of losses—medium-sized firms cut 21,000 and large firms added 73,000 on the month.
The ADP survey provides solid quarterly insight into the Bureau of Labor Statistics’ estimate of total employment, even if the ADP survey is not terribly accurate on a monthly basis.
Over the past three months, the survey has indicated an average of 3,000 new jobs created per month, after losses in August and September.
Other alternative metrics
The ADP survey is not the only alternative measure of the labor market, though.
Revelio, for example, is a workforce intelligence firm that provides a publicly available macroeconomic labor dataset drawn from more than 100 million profiles to present a transparent view of the domestic workforce.
The Revelio survey, which in the month of September indicated a net gain of 60,000 total jobs, will next be updated on Thursday.
The takeaway
As businesses end the labor hoarding of recent years, one should expect an increase in layoffs. Small and middle market firms, according to the ADP private sector employment estimate, are doing just that.
Based on this data, large firms are continuing to hire but at a tepid pace that is consistent with keeping labor market conditions stable.
Given the government shutdown, the ADP data implies an unemployment rate rising to 4.7% if one were to get official labor market data.
But because of the shutdown, there will be no jobs report until the first Friday of December at the earliest.
