The likelihood of another rate cut next week just went up.
ADP released its for the month of November on December 3, and the results were not pretty.
The private sector, which the ADP jobs report exclusively tracks, lost about 32,000 jobs last month. Economists had projected an addition of 40,000 jobs in November, so this missed estimates.
This is the four month this year that the private sector showed negative . The others were June, August and September.
To put that in perspective, before this year, there has only been one month since after COVID of negative private sector job growth, March 2023.
“Hiring has been choppy of late as employers weather cautious consumers and an uncertain macroeconomic environment,” Dr. Nela Richardson, chief economist, ADP, said. “And while November’s slowdown was broad-based, it was led by a pullback among small businesses.”
Goods-producing industries lost 19,000 jobs last month, with 18,000 job losses in manufacturing and 9,000 losses in construction.
Further, service industry jobs dropped by 13,000 last month, with professional business services losing 26,000 and information jobs dropping by 20,000. Also, financial services jobs dropped by 9,000.
The only areas where there were significant gains were education/health services (+33,000), leisure/hospitality (+14,000) and natural resources/mining (+8,000).
Small Businesses Get Hammered
The lion’s share of the job losses was among small businesses. Small businesses lost a staggering 120,000 jobs in November. Medium-sized companies added 51,000 and large companies added 39,000.
Small businesses are feeling the heat from trade uncertainty. Private payrolls declined in November and that decline was most pronounced for companies with fewer than 50 employees,” Jeffrey Roach, chief economist for LPL Financial, said.
Further, most of the losses were in the Northeast, which dropped 100,000 jobs, and the South, which shed 43,000. The Midwest added 45,000 and the West gained 67,000 jobs.
In addition, wages rose 4.4% for job stayers, down from 4.5% in October. For job changers, pay rose 6.3%, down from 6.7% in October.
Fed Expected To Cut Rates in December
The subpar jobs report strengthens the case for the to reduce the by another 25 basis points when it meets December 9-10. The CME FedWatch survey puts the likelihood of a cut at 89%.
It is easy to tie the weakness of November’s jobs report to the big themes affecting the U.S. economy this year: The rise of AI weighing on white-collar employment, tariffs squeezing manufacturing margins and jobs, and shaky holding back holiday season hiring in retail and package-delivery-related jobs,” said Bill Adams, chief economist at Comerica Bank.
Adams added that the ADP report does not show the impact of federal layoffs, which he estimated would have shown a 75,000 to 150,000 decline in federal employment in October if it had been reported.
Adams expects the FOMC to put more weight on this ADP report than usual, due to the lack of government data in recent months due to the shutdown.
“As a result, the Fed is likely to cut the federal funds target another quarter percent at the December 10 decision,” Adams said.
Jobs Picture Deteriorates in ADP Report, Tilting Policy Outlook Toward More Cuts
