A surprise drop of 33,000 private-sector jobs in June—the first decline since March 2023—may influence the Federal Reserve’s timing on rate cuts. Although September remains the most likely month for a cut, odds for July rose to nearly 25% after markets reacted to the weak ADP jobs report. This drop contradicted analysts’ forecasts of a 100,000-job gain. Businesses appear more cautious in hiring amid economic uncertainty, according to ADP’s chief economist Dr. Nela Richardson.
Job losses were mainly in service sectors: professional and business services lost 56,000 roles, education and health services dropped 52,000, and financial activities cut 14,000 positions in June.
Small businesses experienced the largest workforce reductions, with companies employing fewer than 20 people cutting 29,000 jobs and those with 20 to 49 employees losing 18,000 positions. In contrast, large firms with at least 500 workers increased their payrolls by 30,000, indicating differing labor trends by organization size.
The ADP report, based on anonymized payroll data from over 25 million private-sector workers, is considered an early indicator of labor market conditions, though it does not always align with governmental statistics. Additionally, hiring plans monitored by Challenger, Gray & Christmas are at some of their weakest levels since 2004.
Businesses continue to face pressures from trade policy issues and increased costs, leading some to limit their hiring activity. While Federal Reserve Chair Jerome Powell has described the job market as solid, recent figures may prompt concerns about a potential slowdown in the latter part of the year.
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