Private sector employment in the US unexpectedly contracted in June, according to payroll processor ADP, signaling potential weakness in the labor market amid broader economic uncertainty, CNBC reports.
The report, released Wednesday, showed a net loss of 33,000 jobs for the month—well below the 100,000 job increase economists had projected in a Dow Jones poll.
This marks the first monthly decline in private payrolls since March 2023 and comes after May’s gains were revised downward to just 29,000. ADP’s chief economist, Nela Richardson, noted that while layoffs remain relatively rare, employers are showing increased hesitation in hiring and are not actively replacing workers who leave.
The surprise decline contrasts with investor sentiment, which has remained bullish. The S&P 500 ended June at record levels, reflecting optimism about corporate earnings and potential interest rate cuts. However, the soft labor figures may prompt economists to adjust expectations for broader employment trends.
The job losses were concentrated in service-providing industries, particularly professional and business services (down 56,000) and health and education (down 52,000). Financial activities also saw a net loss of 14,000 jobs. In contrast, goods-producing sectors like manufacturing and mining added a combined 32,000 jobs, partially offsetting the decline in services.
Geographically, the Midwest and West recorded the steepest losses, shedding 24,000 and 20,000 jobs respectively. The Northeast saw a smaller decline of 3,000 positions. The South was the only region with net job growth, adding 13,000 roles.
Smaller businesses appeared to struggle more than larger firms. Companies with fewer than 20 employees accounted for 29,000 of the lost jobs, while those with over 500 employees added 30,000 positions, indicating that larger employers are better able to weather current economic conditions.
Wage growth also cooled slightly in June. Annual pay increases for employees who stayed in their jobs declined to 4.4%, down from 4.5% in May. Workers changing jobs saw their pay growth fall to 6.8%, down from 7%.
While the ADP report provides a useful snapshot, it often diverges from the government’s official employment data. Investors and economists are now looking to the US Labor Department’s nonfarm payrolls report, due Thursday, for a fuller picture. That report is expected to show a 110,000-job increase and a slight uptick in the unemployment rate to 4.3%.
Weekly jobless claims, also set to be released Thursday, are forecast at 240,000. The data will arrive during a shortened trading week, with markets closing early for the July Fourth holiday.
