The U.S. government shutdown forced economists and investors to find alternative job reports. Unable to post its nonfarm payrolls, investors needed to look outside of the Bureau of Labor Statistics.
The ADP report showed that layoffs are starting to show layoff trends. In September, the economy shed 32,000 jobs. The good news is that wages increased by 4.5% Y/Y. That strengthens the disposable income for consumers. Investors might buy consumer goods stocks like Best Buy (BBY), Home Depot (HD), or Lowe’s (LOW). Restaurant stocks like QSR (QSR), McDonald’s (MCD), and Starbucks (SBUX) benefit when consumers have higher incomes.
The ADP report noted that despite economic growth in the second quarter, corporations are cautious about their hiring plans. They are likely anticipating a worsening global economic slowdown. Tariffs created enough uncertainty that companies are holding off on buying goods. They do not want to add to inventory whose price paid might change if tariffs varied.
Next month, the Supreme Court will rule on the illegality of tariffs. Corporations should expect courts to invalidate at least some of the duties. Conversely, tariffs that fall under other rules and regulations might stick.
In September, the goods-producing sector shed 3,000 jobs. Service-providing industries lost 28,000 jobs. Professional and business services lost 13,000 jobs, offset by 33,000 jobs increasing in the healthcare and education sectors.
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