Privately run businesses reduced jobs in June for the first time in more than two years, ADP said, as U.S. trade wars created a “hesitancy to hire and a reluctance to replace departing workers.”
Companies eliminated 33,000 jobs last month, the payroll processor said, marking the first decline since March 2023.
“Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month,” said Nela Richardson, chief economist of ADP.
The decline in employment indicates there hasn’t been any improvement in a softening labor market even after the Trump administration in May dialed back the most extreme tariffs.
Companies are filling fewer open jobs than they did a year ago and are unlikely to hire many more people until the economy speeds up.
Wall Street economists and the Federal Reserve believe the economy will grow more slowly in 2025. Gross domestic product shrank in the first quarter for the first time in three years.
If the labor market were to erode further and push up unemployment, the Fed could even come off the sidelines and cut interest rates. The last time it lowered borrowing costs was at the end of last year.
One big caveat: ADP is a poor predictor historically of the official U.S. jobs report that follows a few days later. The two reports often differ by 50,000 or more a month.
The ADP data is released before the Labor Department's nonfarm payrolls report, which is due on Friday morning and can differ notably. The government data is expected to show an increase of 110,000 positions, below the 139,000 reported in May.
Key details: ADP showed a surprising 52,000 decline in education and healthcare jobs — the third straight drop. Employment also fell in finance and professional jobs.
Employment rose at hotels, restaurants, manufacturers and construction companies, ADP said.
The increase in jobs in May was lowered slightly to 29,000 from 37,000.
Big picture: The government is also expected to confirm a slowdown in hiring this year when it publishes the June employment report.
Economists forecast just 110,000 new jobs in June, putting the U.S. on track to create the fewest number of jobs this year since 2010.
Looking ahead: “After a strong start to the year, hiring is losing momentum,” ADP’s Richardson said.
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