Additional Coverage:
Private Sector Job Growth Unexpectedly Stalls in June
Private sector employment took an unexpected dip in June, shrinking by 33,000 jobs, according to the latest ADP National Employment Report. This marks the first decline since March 2023 and contrasts sharply with economists’ predictions of a 100,000 job increase. May’s figures were also revised downwards, showing a gain of just 29,000 jobs, down from the initially reported 37,000.
Nela Richardson, ADP’s chief economist, attributed the decline to a hiring slowdown and a reluctance to replace departing employees, rather than widespread layoffs.
While the ADP report offers valuable insights, it’s worth noting that its predictions don’t always align with the official government jobs report, which is generally considered more authoritative. The government’s nonfarm payrolls report, due out Thursday, is expected to show a healthier increase of 110,000 jobs for June, with the unemployment rate potentially rising slightly to 4.3%. The ADP report may lead some economists to adjust their forecasts.
Service Sector Drives Job Losses
The decline in June’s employment figures was primarily driven by the service sector. Professional and business services experienced the most significant losses, shedding 56,000 jobs, followed by health and education, which lost 52,000 jobs. Financial activities also saw a decline of 14,000 positions.
These losses were partially offset by growth in goods-producing sectors, including manufacturing and mining, which added a combined 32,000 jobs. However, the overall decline in service sector jobs (-66,000) outweighed the gains in goods-producing roles.
Regional and Company Size Trends
Job losses were concentrated in the Midwest and West, with declines of 24,000 and 20,000 jobs, respectively. The Northeast also experienced a modest decline of 3,000 jobs. The South was the only region to see job growth, adding 13,000 positions.
Smaller businesses were disproportionately affected, with companies employing fewer than 20 people accounting for 29,000 of the net job losses. Conversely, larger companies (500+ employees) saw the most significant growth, adding 30,000 jobs.
Wage Growth Moderates
Annual income growth slowed slightly in June for both job stayers and those changing jobs. Job stayers saw their pay increase by 4.4%, down from 4.5% in May, while those who switched jobs experienced a 6.8% increase, down from 7%.