ADP report was 'good news for the Fed': Economist

ADP's private payroll numbers topped economist expectations for September. The print revealed 143,000 jobs were added in the private sector last month, above the estimated 125,000 jobs. ADP chief economist Nela Richardson joins Wealth! to break down the report.

Richardson observes that despite stronger hiring numbers, the ADP data revealed no increase in wage growth, showing "a moderation in job stayer pay and a deep decline in job changer pay." She explains that this dynamic suggests the hiring growth won't fuel inflation, which is "good news for the Fed," but also indicates the job market is still robust.

"We're as close to a Goldilocks scenario as I think we're going to get in this labor market," she tells Yahoo Finance.

Watch the video above to hear what Richardson says about the relationship between hiring trends and wage growth, and their impact on the health of the labor market.

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Angel Smith

Video transcript

Job creation in the private sector in September, rebounding from a five month slowdown according to AD P, only one sector information lost jobs while manufacturing added jobs for the first time since April here with more analysis.

We've got AD P chief economist Richardson Nala, great to always have you on the program and grab some time.

I mean many of us here our own Josh Schaper.

I heard him listening into the call while he was in the make up room earlier this morning.

So we, we are all locked into this data.

I just wanna get your broad read right now on the state of the labor market.

Yeah, Josh asked a really great question during that call.

It really sets up the tone for what we're thinking about the labor market.

We saw this rebound of 100 and 43,000 from a revised 100 and 3000 last month.

This is significant in many ways because that stronger hiring didn't need and require stronger pay graph.

So even as hiring strengthened, we saw a moderation in job saver pay and a deep decline in job changer pay, which you know, Brad that we track really, really closely with this huge matched individual uh data set at the worker level level that AD P provides.

So what does that mean?

It means that we don't have to worry that hire uh hiring is going to, to an increase in inflation.

And so that's good news for the Fed, but it also means that the jobs market is still strong.

So we're as close to a goldilocks scenario as I think you're gonna get in this labor market, you know, what is, what is valued the most in this labor market, especially as you do have people that are still looking for the opportunity to change jobs or to perhaps increase their salary when they do change jobs.

Even though we know that based on what was in this report, you say, typically workers who change jobs see faster pay growth, but their premium over jobs there is actually shrink to only 1.9% matching a low that we last saw in January.

So what, what is really valued for those who are changing jobs right now?

I imagine from what you're seeing in the data, right?

Well, usually you get that bump in pay when you change jobs.

That's the main reason a lot of people change jobs.

But what we're seeing and this is important that people who are staying a year or longer on the job are seeing higher pay growth higher than we've seen before.

The pandemic.

So yeah, you're not getting that bump like you used to from switching, but you are getting a better growth rate from staying.

And I think that's uh that reality of today's labor market is not only translating through AD PS data, but also if you look at jolts, the quips rate is lower, you saw that job openings tipped up again.

So that is consistent with the story that firms are hiring uh to grow their workforce not to replace workers who have left because working conditions including pay growth have improved over the last three years.