A significant downturn in the U.S. labor market was reported for November, as private companies cut 32,000 jobs, according to payroll processing firm ADP. This decline reflects a deeper economic concern, with small businesses suffering the most. The data revealed a stark contrast to October, which witnessed an upwardly revised increase of 47,000 positions, and came in well below economists’ expectations of a 40,000 increase.
While larger companies—defined as those employing 50 or more people—added a net 90,000 positions, smaller establishments, particularly those with fewer than 50 employees, experienced a substantial decline of 120,000 jobs. Firms with 20 to 49 employees accounted for a significant portion of this loss, shedding 74,000 jobs. This drop represents the largest since March 2023.
Among sectors, education and health services showed resilience, with 33,000 new hires, and the leisure and hospitality industry added 13,000 positions. However, the broader trend was downward across various industries. Professional and business services faced the steepest losses, cutting 26,000 jobs. Additionally, the information services sector lost 20,000 positions, manufacturing saw an 18,000 decrease, and both financial activities and construction sectors dropped by 9,000 jobs.
Compounding these challenges, wage growth slowed, with workers staying in their positions seeing a year-over-year pay increase of 4.4%, down slightly from the previous month. Nela Richardson, ADP’s chief economist, indicated that hiring has become inconsistent recently, as employers navigate cautious consumer behavior and a precarious macroeconomic landscape. She noted that while the slowdown in November was pervasive, it was predominantly influenced by the pullback among small businesses.
This ADP report serves as the final employment update for the Federal Reserve as it prepares for its upcoming meeting on December 9-10. Futures traders indicate a nearly 90% likelihood of a quarter-percentage-point interest rate cut, although some Fed officials have expressed concerns regarding the necessity of further easing. The ongoing debate among policymakers reflects differing views on whether such cuts would be beneficial for the labor market or if they could exacerbate inflation, which remains significantly above the Fed’s target of 2%.
The Bureau of Labor Statistics is set to release its report on nonfarm payrolls on December 16, a date postponed due to a recent government shutdown. This upcoming data will provide additional insights into the evolving employment landscape amid these economic challenges.
