Small businesses drive surprise drop in US private jobs, ADP says

Reuters, the Hill, CNBC, CNN, and the New York Times, and Bloomberg contributed to this report.

US private employers unexpectedly cut jobs in November, and the pain was concentrated squarely on small businesses, according to new data from payroll firm ADP.

The report showed private payrolls fell by 32,000 jobs last month — the biggest drop since early 2023 and a sharp reversal from October’s revised gain of 47,000. Economists had expected an increase of around 10,000–40,000 jobs, so the decline caught Wall Street off guard.

But before anyone declares a jobs crisis, many economists are urging caution.

The ADP report lands at an awkward time: official labor market data from the Bureau of Labor Statistics (BLS) has been delayed because of the recent government shutdown. The November jobs report, which was supposed to come out earlier this month, won’t be released until Dec. 16, and the BLS is skipping a full October report entirely.

That makes ADP’s numbers one of the only fresh reads on the job market ahead of next week’s Federal Reserve meeting — but it’s far from perfect.

Economists have long warned that ADP’s monthly figures don’t always line up well with the official BLS payroll numbers.

“It is too loosely correlated with the official data to be troubling,” said Samuel Tombs, chief US economist at Pantheon Macroeconomics. “It would be unwise to lower forecasts for the official data on the back of ADP’s number, given its awful track record.”

Other indicators, like unemployment claims, still point to a “no hire, no fire” environment: hiring has cooled, but layoffs haven’t surged.

Where ADP’s report is crystal clear is who is cutting jobs.

• Businesses with fewer than 50 employees slashed an estimated 120,000 jobs in November — the biggest one-month drop since 2020.
• Medium-sized firms (50–499 workers) added about 51,000 jobs.
• Large companies (500 or more workers) added 39,000 jobs.

So while big companies are still hiring, Main Street is under serious pressure.

“When you look historically, the labor market is not weak, but it is weakening — and the first to crack are small establishments,” said Nela Richardson, ADP’s chief economist. “I see them as a canary in the coal mine.”

Economists say small firms are being squeezed by higher costs, shifting tariffs, cautious consumers and thinner margins. They often don’t have the cushion to absorb rising expenses, so they pull back on hiring — or quietly don’t replace people who leave.

“Businesses are likely staying lean – delaying hiring, not replacing workers – versus making outright layoffs,” Richardson said. “And all of that is adding up to job losses on a national level.”

Job losses were spread across a wide range of industries. According to ADP, November saw:

• Professional and business services: -26,000;
• Information: -20,000;
• Manufacturing: -18,000;
• Financial activities: -9,000;
• Construction: -9,000.

There were some pockets of growth:

• Education and health services added about 33,000 jobs;
• Leisure and hospitality added 13,000.

Overall, though, ADP says private employers have cut jobs in four of the last six months, and the November decline was the largest in about two and a half years.

Wage growth is also cooling. Workers who stayed in their jobs saw pay rise 4.4% year-over-year, a touch lower than October. Job switchers saw a 6.3% increase, the weakest since early 2021.

Because of the data delays from the shutdown, the Federal Reserve will not have a full government jobs report for November when it meets on Dec. 9–10 to decide on interest rates. That gives the ADP report more influence than usual, even with its limitations.

Investors are betting heavily that the Fed will cut rates again — futures markets put the odds of a quarter-point cut at around 90%.

Inside the Fed, though, there’s division:

• Some policymakers argue that slowing job growth and rising unemployment justify more rate cuts to protect the labor market.
• Others worry that inflation, still above the Fed’s 2% target, could flare back up if they ease too aggressively.

“The ADP report might be all that it needs for the more dovish-leaning governors to counter some hawkish-leaning regional presidents to push through another rate cut,” said Sal Guatieri, senior economist at BMO Capital Markets.

Financial markets seemed to read the report as one more nudge toward easier policy: Treasury yields slipped, and the dollar weakened against other major currencies after the data hit.

Alongside the jobs data, a separate report on import prices offered a mixed inflation signal.

The BLS said import prices were unchanged in September, defying expectations for a small increase. Higher prices for some consumer goods were offset by cheaper energy, including a 1.5% drop in imported fuel and a 3% decline in natural gas prices.

Over the last 12 months, overall import prices are up 0.3%, the first year-over-year increase since March. Excluding food and fuel, core import prices rose 0.3% in September and 0.8% over the year, helped in part by a weaker dollar.

Economists say the impact of tariffs still hasn’t fully shown up in consumer prices because many businesses have been absorbing the extra costs rather than passing them on.

But that can’t go on forever.

“Any hope from Washington officials that America’s partners would try to cut back their prices to make the tariff costs more palatable is not being seen in the data,” said Christopher Rupkey, chief economist at FWDBONDS. “Tariffs will be added to the costs that Americans pay for incoming goods once the ships dock at US ports.”

With small businesses already cutting jobs and margins under pressure, many analysts worry that higher costs plus weaker demand could spell more trouble for hiring in the months ahead.

For now, the story of the US job market looks less like a crash and more like a slow, uneven softening — but with small businesses flashing bright yellow warning lights.