Midwest Loses Thousands of Jobs as Southern States Boom

A slowdown in hiring in manufacturing and leisure and hospitality hurt the Midwest as the region lost thousands of jobs in October, according to data from the ADP Research Institute in collaboration with Stanford Digital Economy Lab, even as employers added workers in other parts of the country.

Meanwhile, the southern United States saw a boom in hiring, adding tens of thousands of jobs for the month.

The loss of jobs in the Midwest was concentrated in the East North Central part of the region, which includes Indiana, Illinois, Michigan, Ohio and Wisconsin, where companies cut 17,000 jobs. The West North Central part of the Midwest added 4,000 workers.

Southern states registered the highest number of hiring by companies at 64,000. Overall, employers hired 113,000 people, which was lower than what economists expected but higher than last month's recruitment of 89,000. A Bloomberg poll had forecast hiring for October to hit 150,000.

In the Rust Belt states, manufacturing is a key driver of the labor market, and when that industry struggles, it hurts jobs, said Nela Richardson, chief economist at ADP. The region also has a significant number of small businesses, which also saw a decline in hiring. Firms that have between 20-49 employees shed jobs in October, ADP data shows.

"Two-thirds of leisure and hospitality employees come from firms with under 50 employees. So it's a mixture of the softness in manufacturing, but also softness in leisure and hospitality that I think are driving this result," Richardson said in response to Newsweek's question during a call with reporters on Wednesday.

The jobs numbers come a week after the U.S. economy grew by 4.9 percent in the three months to September, driven by strong consumer spending, despite an environment of high interest rates spurred by the Federal Reserve. The central bank has hiked rates since March 2022 to battle high inflation that at one point hit a 40-year high.

However, consumers are still navigating elevated prices and costly rates, mainly because of a strong jobs market.

The Fed is set to announce its latest rate hike decision later on Wednesday.

"In our view, that resilient consumer is the difference maker between a soft landing economy and a hard landing economy," Richardson said, referring to a scenario where high rates help to moderate inflation without doing too much damage to the economy. "But that consumer is being held up and supported by the labor market, including in this month's report."

While companies are still hiring, there was evidence of some softness in the labor market. Leisure and hospitality, which drove the post-pandemic hiring, has slowed, Richardson said, adding only 17,000 jobs across the country.

"This was one of the few months, I think, the only month where leisure and hospitality wasn't dominating the jobs game," Richardson said.

During the pandemic-induced economic crisis, the sector suffered the most but recovered strongly after the re-opening of the U.S. economy.

"Month over month for the last two years, we've seen firms in the sector, establishments, hiring rapidly trying to get people back in the door," Richardson said. "That's slowed."

That shift will shape the labor market going forward.

"That means that we're not going to see these really, really, strong surges in hiring," Richardson added.

Education and health services hired 45,000 people in October, the most hiring seen for the month, signaling how the sector was holding up well in the latter part of the year.

"If you think about the demographics of the U.S. population, this is a sector that's going to become increasingly more important, and in my view, a little increasingly burdened by the demands of an aging population," Richardson said.

Wage growth, even though it was still higher than before the pandemic, showed signs of slowing, ADP data showed. Job-stayers said they received a 5.7 percent year-over-year pay increase in October, the slowest pace of growth since October 2021. Meanwhile, those who changed jobs saw an 8.4 percent pay rise—the smallest increase since July 2021.

The slowdown in hiring in sectors like leisure and hospitality and a decline in pay rise is yet to signal a return to the pre-pandemic labor market, Richardson said.

"It's not exactly the same market as it was in 2019. Labor shortages are more persistent. It's hard to know whether a sector is slowing because the companies are just hiring less, or they can't find workers," she said.

She pointed out that some companies pay close attention to layoffs as a way to poach talent.

"That is a signal that sometimes when we look at soft hiring numbers, it may be because there's just not enough people to hire them. That's very different from 2019, where companies weren't hiring because they didn't want to," Richardson added.

On Wednesday, job openings increased slightly in September to 9.6 million from last month's availability of 9.5 million, the U.S. Bureau of Labor Statistics (BLS) said, once again above economists' expectations of 9.4 million. The data seemed to echo Richardson's point that employers are seemingly still looking for workers and, as much as possible, looking to retain their employees.

The number of new hires was "little changed" at 5.9 million at a rate of 3.7 percent for the third month straight, according to BLS. Meanwhile, the number of total separations in September—which includes people who have either quit their jobs or have been laid off—also barely changed at 5.5 million.