According to the ADP National Employment Report, the private sector shed 33,000 jobs in June. This major drop fell short of forecasts, which had been anticipating an increase of 100,000 jobs. That would mark the first month of falling private payrolls since March 2023, according to FactSet. Moreover, it deepens the doubts about the true health of the job market. Produced and released by ADP, the report draws attention to several trends impacting employment by sector and area.
As ADP’s chief economist Nela Richardson noted, layoffs remain a rarity. She noted that increasingly businesses are still pulling back on hiring and not willing to backfill workers who exit, which contributed to last month’s declines in job growth. The new report points to a profound change in employment role — especially by smaller companies.
In May, workers who remained in their positions enjoyed an average wage increase of 4.5%. By June, that rate had fallen to 4.4%. At the same time, their share of people finding new jobs dropped to 6.8% from 7%, an early indication of a tight labor market.
The report draws specific attention to an unusual payroll contraction among the largest firms. Business establishments with more than 500 employees gained 30,000 jobs in an essentially one month period. Small firms—like businesses with less than 20 employees—were responsible for a net decrease of 29,000 jobs. This gap means larger firms are doing better during the current economic downturn.
Looking at sector analysis, we can see that goods-producing occupations experienced a jump of 32,000 jobs. The opposite was true. Payrolls for service jobs fell by 66,000. The professions, scientific, and management sector decreased by 11,800 jobs. The financial activities sector lost 14,000 jobs. At the same time, professional and business services experienced a sharper drop too, losing 56,000 positions. Health and education were even worse with a net loss of 52,000 jobs.
The boost in employment was greatest across the South U.S. It added 13,000 jobs, the only region to have a net increase in payrolls. The contractions were more pronounced in the Midwest and Western regions, with both losing 24,000 and 20,000 jobs respectively.
ADP lowered it May’s job growth number to only 29,000 jobs added from the initial report of 37,000. This downward revision adds to the challenges the labor market continues to face.