US Consumer Spending Slows as PCE Inflation Cools and ADP Reports 90,000 New Jobs
U.S. consumer spending slows in August as the Fed's preferred inflation measure cools, while private sector jobs unexpectedly rise by 90,000 in September according to the ADP report.
A surprising slowdown in private consumer spending was recorded in August in the United States, according to the Personal Consumption Expenditures (PCE) price index preferred by the Federal Reserve. A year-on-year increase of 2.6% was registered in personal consumption expenditures last month, compared to expectations for a larger rise of 3.7% and a 3.4% increase in July. The core index, which excludes food and energy consumption, remained unchanged from July at 3.0%, while forecasts had pointed to a 3.3% increase.
Second-Quarter GDP and Labor Market Recovery
At the same time, the U.S. economy grew at an annualized rate of 2.2% in the second quarter, according to the third reading, following two previous estimates of a 1.5% increase in U.S. gross domestic product. In the first quarter, the American economy grew by 2.1%. Furthermore, a surprising increase in private sector jobs was recorded in the U.S., with the addition of 90,000 jobs in September. The ADP report shows a recovery in job creation following a brief slowdown, featuring balanced growth between services and manufacturing, alongside moderate wage growth.
Employment data strengthens the sentiment in the markets that the U.S. labor market is stabilizing ahead of the official employment report scheduled for Friday. Forecasts had anticipated an addition of 68,000 jobs, following an increase of 36,000 in August. The report also demonstrated a relatively balanced distribution: service providers added 59,000 jobs, while goods producers contributed 31,000.
Wage Growth and Sector Breakdown
"This is a strong report," said Nela Richardson, chief economist at ADP. "Following a three-month slowdown, job creation has rebounded and wage growth remains solid."
Base pay increased by 3.2% compared to the previous year, while gross pay accelerated by 4.7%. Education and health services contributed the largest share, with 55,000 new employees. Additional growth sectors included leisure and hospitality (22,000), manufacturing (17,000), and construction (15,000). A small number of sectors registered job losses, including financial activities (-16,000), professional and business services (-11,000), and natural resources and mining (-1,000).
