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U.S. Private Sector Sheds 32,000 Jobs in November, Sparking Rate Cut Hopes
NATIONAL NEWS – The U.S. private sector experienced an unexpected downturn in November, cutting 32,000 jobs, according to payroll firm ADP. This surprise reduction in employment could strengthen the case for an interest rate cut by the Federal Reserve next week.
Economists surveyed by FactSet had anticipated a different outcome, forecasting an increase of over 40,000 private-sector jobs for the month.
Nela Richardson, ADP’s chief economist, noted the recent volatility in hiring, attributing it to “cautious consumers and an uncertain macroeconomic environment.”
The bulk of the job losses originated from small businesses, those employing fewer than 50 individuals, which collectively shed 120,000 positions. Matthew Martin, senior U.S. economist at Oxford Economics, highlighted that these smaller firms have been particularly affected by “policy uncertainty, rising input costs and high interest rates.”
The professional and business services industry led the decline, eliminating 26,000 jobs. Conversely, the leisure and hospitality sector saw a gain of 13,000 jobs, likely in preparation for the upcoming holiday season.
While ADP’s figures are not always considered a definitive predictor of overall job growth, they are closely monitored as an indicator of the U.S. economy’s health. This is especially true now, as official government data remains incomplete due to the 43-day federal government shutdown that concluded in November.
This latest data from ADP has led economists to believe there’s a higher probability that the Federal Reserve will reduce its benchmark interest rate when policymakers convene on December 9-10.
Oren Klachkin, an economist at Nationwide Financial Markets, commented on the internal disagreements among Fed policymakers but maintained his prediction that “doves will prevail over the hawks and the FOMC to vote for another 25bps interest rate reduction at next week’s meeting,” citing the more somber economic outlook presented by the ADP report.