Private Sector Job Losses Signal Economic Concerns Amid Market Optimism

Sunrise, Florida — The latest report from payroll processing firm ADP indicates that private sector hiring unexpectedly contracted in June, raising questions about the strength of the economy. The report, released on Wednesday, shows a loss of 33,000 jobs for the month, marking the first decline since March 2023.

Economists surveyed by Dow Jones had predicted an increase of 100,000 new jobs. The previous month’s job growth was also revised downward, with only 29,000 jobs added in May compared to an earlier estimate of 37,000. Nela Richardson, ADP’s chief economist, noted that while layoffs are still uncommon, hesitance to hire and reluctance to replace departing employees contributed to last month’s job losses.

The ADP report has a mixed track record when forecasting government job figures, which often carry more weight with investors. Following the softer ADP data in May, the subsequent government report showed substantially different results. This Thursday, the government’s nonfarm payrolls report is expected to show an increase of 110,000 jobs, according to Dow Jones estimates, along with a potential rise in the unemployment rate to 4.3% from 4.2%.

Jobless claims data, also due out Thursday, is anticipated to show 240,000 claims. This flurry of labor statistics coincides with a shorter trading week due to the July 4 holiday, with the market closing early on Thursday and remaining closed on Friday.

ADP reported that the majority of job losses occurred within the services sector, particularly in professional and business services which lost 56,000 jobs, and health and education sectors, which shed another 52,000 positions. Financial roles also decreased with a loss of 14,000 jobs, but the overall decline was softened by growth in goods-producing industries, which gained 32,000 jobs.

The Midwest and Western regions faced the steepest job losses, with declines of 24,000 and 20,000 respectively. Conversely, the Southern U.S. reported a net increase of 13,000 jobs, being the only region showing payroll growth.

Smaller businesses suffered more losses compared to larger firms. Companies with over 500 employees saw a net gain of 30,000 jobs, while firms with fewer than 20 employees accounted for a loss of 29,000 positions.

Annual income growth for workers remained relatively stable but showed a slight decrease for both those who remained in their jobs and those who changed positions. Pay increases for individuals staying in jobs dipped to 4.4% down from 4.5%, and for those changing roles it fell to 6.8%, down from 7%.

Despite these employment concerns, the S&P 500 index has risen more than 4% this year, showing a remarkable recovery in the second quarter even amid fears surrounding economic policies and trade tensions.