A new jobs report shows modest growth — but with white-collar layoffs accelerating ADP's report, which comes during a blackout in government data, shows modest hiring and flat pay, with white-collar layoffs spreading

 

ADP’s latest jobs report shows a U.S. economy that’s taking one step forward and one step back.

According to the report released Wednesday morning — which, per ADP, is “an independent measure of the labor market based on the anonymized weekly payroll data of more than 26 million private-sector employees in the United States” — employers added 42,000 jobs in October. Annual pay was up 4.5%, unchanged from September.

On the surface, that could look like a rebound after two months of negative job growth. But dig deeper into the data, and you’ll see a widening split between sectors as well as serious white-collar retrenchment, even as the government shutdown — now the longest in history — drags on.

Per the report, the gains are modest yet real, and the opposite of 'broad-based'

Hiring was concentrated in education and health care (+26,000) and trade, transportation, and utilities (+47,000). Meanwhile, white-collar and consumer-facing industries continued to shrink, and shrink fast. Professional and business services (–15,000), information (–17,000), and leisure and hospitality (–6,000) all shed jobs for a third straight month.

This pattern — growth in areas like healthcare and logistics, people effectively have to spend and thus demand is inelastic, versus contraction in areas where people must choose to spend — captures the “bifurcated” economy that Federal Reserve Chair Jerome Powell spoke of at last month’s FOMC press conference. Low-income and service-sector workers are still employed, but inflation is eroding their purchasing power. Higher-income white-collar workers, once shielded, are now seeing layoffs across not just media but tech and consulting — the once-strong bastions of the knowledge economy. Meanwhile, tens of thousands of government employees find themselves furloughed, a reality that isn't captured in private-sector-only reports like ADP's.

With the Bureau of Labor Statistics still shuttered and Washington effectively closed for business, ADP’s private-payrolls data has become one of the few real pulses on hiring, however imperfect. Earlier this year, President Donald Trump fired the BLS commissioner after complaining about “fake” jobs numbers. Now, little official data is being released at all.

The Fed, which cut rates in October expressly on fears of labor-market weakness, will likely take little comfort from today’s report. Very modest positive hiring plus flat pay growth, plus white-collar losses? In all, it suggests the economy isn’t collapsing, while it’s definitely not accelerating or even healing either. The picture the ADP report shows is of a U.S. adding just enough jobs to avoid recession headlines, and losing just enough to feel like a recession anyway.

McDonald's (MCD.N), opens new tab beat estimates for third-quarter global comparable sales on Wednesday as affordable meal offers from the fast-food giant helped whet demand even as consumers remained selective with their spending.

Shares of the company rose 3.5% in early trading.

Strength across its U.S. and international markets helped the burger chain post global same-store sales growth of 3.6%, slightly ahead of analysts' average estimate for a 3.55% increase, according to data compiled by LSEG.

Fast-food chains ,including McDonald's, Domino's Pizza (DPZ.O), opens new tab and Taco Bell owner Yum Brands (YUM.N), opens new tab have rolled out cheaper meal bundles and limited-time offers to offset a slowdown in restaurant traffic.

McDonald's executives pointed to high prices of essentials such as rent, food and childcare weighing on low-income consumers. "So long as that consumer cohort is feeling like real incomes are under pressure, I wouldn't expect to see significant change there," CEO Chris Kempczinski said on a post-earnings call.

DEALS TO THE RESCUE

McDonald's has kept its $5 meal deal in place for more than a year, prioritized menu innovation, and intensified marketing efforts to revive demand among low-income diners.

It expects U.S. comparable sales growth to accelerate in the fourth quarter, also helped by strong early momentum from its Monopoly promotion in October.

"(Promotional) efforts appear to be paying off as (McDonald's) drove cost-conscious diners to spend at a time when pricier chains like Chipotle and Cava are seeing consumers pull back," said Emarketer analyst Zak Stambor.

In September, the company reintroduced its Extra Value Meals and began working with franchisees to standardize a 15% discount on combo meals nationwide, up from the current 10% to 11%.

"For McDonald's, the Snack Wrap is a good example of a 'fan favorite' and is a high-margin, low-cost menu item for consumers (also immune to beef costs) and I would expect more of these a la carte options to return as it gives consumers more control over how they spend their wallet share," said Brian Mulberry, senior client portfolio manager at Zacks Investment Management.

Comparable sales in the U.S., McDonald's largest market, rose 2.4% in the quarter ended September 30, compared with a 0.3% rise a year earlier.

Sales in its business segment, where restaurants are operated by local partners, jumped 4.7%, led by Japan, while international market sales rose 4.3%, driven by Germany and Australia.

Quarterly adjusted profit per share came in at $3.22 per share, below analysts' estimate of $3.33, per data compiled by LSEG.