Hiring in the private sector contracted in June, marking the first decline since March 2023, which suggests the U.S. labor market’s softness may be accelerating.
According to payroll processor ADP’s National Employment Report, private sector payrolls fell by 33,000 last month, down from May’s downwardly revised 29,000 position.
Economists had anticipated that private sector employment would have increased by 95,000.
The services sector erased 66,000 jobs, led by professional and business services (negative 56,000), education and health (negative 52,000), and financial activities (negative 14,000). Gains were observed in leisure and hospitality (32,000), trade, transportation, and utilities (14,000), and information (5,000).
In the goods-producing sector, 32,000 jobs were created, driven by manufacturing (15,000), construction (9,000), and natural resources and mining (8,000).
“Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month. Still, the slowdown in hiring has yet to disrupt pay growth,” Nela Richardson, chief economist at ADP, said in a statement.
Small businesses—those with payrolls of 1 to 49—were hit the hardest, losing 47,000 jobs. Large companies accounted for all of the employment gains, registering 30,000 new positions.
Pay gains, meanwhile, slowed at a tepid pace last month. Median changes in annual pay for job-changers and job-stayers eased to 6.8 percent and 4.4 percent, respectively.
Economists are typically skeptical of the ADP payroll numbers because they often diverge from official Bureau of Labor Statistics data due to methodology.
Hint of the Future
Still, it might be a hint of what is to come in the U.S. labor market.
The June jobs report will be released on July 3, a day earlier than usual, due to the Fourth of July holiday.
“The surprising miss on the ADP report this morning calls into question what we will see in the jobs report tomorrow morning,” Chris Zaccarelli, the CIO of Northlight Asset Management, in a note emailed to The Epoch Times.
“One of the reasons the Fed has been able to be patient before cutting rates was because the job market was holding up so well, so if that were to change then the Fed may be forced to move earlier than they would like.”
The consensus forecast suggests the economy created 110,000 new jobs last month, and the unemployment rate ticked up to 4.3 percent.
While the headline number could be below the monthly average of 124,000 this year, it is likely to confirm the view that employment conditions are not deteriorating at a worrisome pace, says Michael Brown, a senior research strategist at Pepperstone.
“Figures in line with, or better than expectations, will simply solidify the FOMC’s [Federal Open Market Committee’s] view that it is most appropriate, for the time being, to continue sitting on the sidelines,” Brown said in a note.
A softer June report could bolster the odds even further of an interest rate cut at the September policy meeting.
It could also highlight the persistent year-long trend of companies putting their personnel plans on ice. Various reports have indicated employers are neither hiring nor firing staff amid economic uncertainty.
New data from global outplacement firm Challenger, Gray and Christmas show that U.S.-based employers announced 47,999 job cuts in June, the lowest tally so far this year, down from 93,816 in the previous month.
This also represented the third consecutive monthly decline.
“The bulk of companies cited economic conditions last month. We saw some DOGE activity and have tracked over 2,000 jobs directly attributed to tariffs this year, but for the most part it was a quiet June,” Andrew Challenger, the firm’s senior vice president, said in a statement.
At the same time, demand for labor remains solid, with the number of job vacancies unexpectedly surging to 7.7 million in May.
Market Reaction
U.S. stocks turned negative before the opening bell shortly after the ADP report.
The tech-heavy Nasdaq Composite Index fell by about 100 points, or 0.4 percent. The broader S&P 500 and the blue-chip Dow Jones Industrial Average dipped by about 0.1 percent.
This week, the S&P 500 and the Nasdaq notched record highs to cap off a whirlwind second quarter.
“The second half of 2025 will call for a steady hand,” Jeff Buchbinder, the chief equity strategist at LPL Financial, wrote in a note emailed to The Epoch Times.
“For equities, the outlook is one of tempered optimism with the S&P 500 having just reached a new all-time high and stock valuations elevated. With limited room for multiple expansion and tariffs beginning to bite, volatility may persist.”
The U.S. dollar index, which has cratered almost 11 percent this year, rose by 0.2 percent and firmed above 97.
Yields on U.S. Treasury securities were mixed, with the benchmark 10-year yield reaching 4.3 percent.
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