U.S. private payrolls unexpectedly declined in June, with employers cutting 33,000 jobs-the first monthly drop since March 2023-signaling growing caution across the labor market even as layoffs remained historically low, according to a Wednesday report from ADP and the Stanford Digital Economy Lab.
The figures sharply missed economists' expectations. Dow Jones had forecast a gain of 100,000 jobs, while Reuters analysts expected an increase of 95,000. May's total was also revised downward to 29,000 from the 37,000 initially reported.
"Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month," said Nela Richardson, ADP's chief economist.
The contraction was driven by steep losses in the services sector, with professional and business services cutting 56,000 jobs and education and health services losing 52,000. Financial services payrolls fell by 14,000.
Overall, service-providing roles lost 66,000 positions, while goods-producing industries, including manufacturing and mining, added 32,000 jobs.
Geographically, the Midwest saw the sharpest decline at 24,000 jobs lost, followed by a 20,000 drop in the West. The Northeast declined by 3,000. The South stood out as the only region with job growth, gaining 13,000 positions.
Smaller businesses were disproportionately affected. Companies with fewer than 20 employees shed 29,000 jobs, while large employers with over 500 workers added 30,000.
The labor market data arrives ahead of the government's broader employment report scheduled for release Thursday. Economists expect the Bureau of Labor Statistics to show an increase of 110,000 in nonfarm payrolls for June and a slight uptick in the unemployment rate to 4.3% from 4.2%.
Separate figures from Challenger, Gray & Christmas revealed job cuts by U.S.-based employers fell 49% in June to 47,999, with quarterly layoffs plunging 50% to 247,256. However, hiring announcements also dropped significantly to just 3,191 in June, down from 9,683 the month before.
The slowdown in hiring is corroborated by the latest Job Openings and Labor Turnover Survey, which showed hires fell by 112,000 in May, bringing the total to 5.503 million. There were 1.07 job openings for every unemployed person in May, slightly up from April's 1.03.
Andrew Challenger, senior vice president at Challenger, Gray & Christmas, noted: "Without a strong economic driver, hiring may remain measured through the rest of the year."
Meanwhile, annual income growth eased slightly. Pay gains for job stayers ticked down to 4.4% from 4.5%, while job changers saw a decline to 6.8% from 7%.
