A worker installs a part on an assembly line in Toledo, Ohio. The manufacturing industry added 35,000 jobs in September, the most since May 2010, a new report shows.
American businesses added 213,000 jobs in September, led by the strongest gain in the manufacturing sector in more than four years, the ADP National Employment Report showed Wednesday.
The number exceeded the median forecast of economists, who called for a gain of 205,000, and was up from the 202,000 jobs the group said were added in August.
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Sustained monthly job growth will translate into a gradual ironing out of slack in the labor market, the underutilized parts of the workforce that includes people who'd like to work but can't for whatever reason. Wage growth is one part of the recovery that has yet to fully materialize, and less slack would put pressure on businesses to raise pay to stay competitive.
'At this pace of job growth, just north of 200,000 per month, that would be consistent with a steadily tightening labor market,' Mark Zandi, chief economist for Moody's Analytics, said in a conference call with reporters after the report. 'The unemployment rate and underemployment rate should decline at roughly half a percentage point of the labor force per annum at this pace of job growth.'
The jobless rate in the U.S. is 6.1 percent, according to the Labor Department's most recent figures. That reading has improved by roughly one percentage point each year since 2011 and Zandi anticipates it'll be about 5.5 percent at this time next year if the current pace of job growth continues.
'Then we'll start to absorb the large number of people who stepped out of the workforce because they're discouraged or couldn't find job opportunities. They'll start stepping back in and ultimately we'll absorb those part-timers who want to work full-time,' Zandi says.
For most, income growth has just barely kept up with the cost of living, and more robust income growth will boost people's confidence, Zandi says. That could bode well for consumer spending, which makes up the biggest part of the economy.
September job gains were broad-based across firms of all sizes. Companies with fewer than 50 employees added 88,000 jobs in September, while medium-sized firms with between 50 and 499 workers added 48,000, the report showed. Large businesses with 500 workers or more took on 77,000 more people.
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The manufacturing industry added 35,000 jobs in September, the highest total in that sector since May 2010, the ADP report showed. Construction added 20,000 new jobs, below a prior gain of 23,000.
Professional and business services took on 29,000 more employees in September, down from 37,000 in August, and the transportation and utilities sector grew by 38,000, up from 30,000. The financial services sector grew by 5,000 jobs, down just slightly from last month.
Employers have added at least 200,000 jobs a month for the past six months straight, according to ADP's figures. In the almost two years since Moody's became the compiler of the ADP payroll number, the report has overshot or undershot the Labor Department's reported figure by a median of 34,000, Jim O'Sullivan, chief U.S. economist at High Frequency Economics, wrote in a research note Wednesday.
The Labor Department releases the official government estimate of September job gains on Friday. The consensus estimate of Bloomberg-surveyed economists calls for a payroll gain of 218,000 in September and an unemployment rate unchanged at 6.1 percent.
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