Contrary to expectations, the private sector in the US has shed 32,000 jobs, a sharp reversal of last October’s revised increase of 47,000 jobs. The disappointing result of the ADP National Employment Report has shocked most forecasters, who were expecting jobs to grow, albeit at a slow pace. The surprise fall has heightened speculation surrounding future monetary policy by the Federal Reserve, particularly during the critical holiday season.
Small businesses are behind the fall in employment for November
The job losses in November were mainly observed in small businesses, which employ fewer than 50 people. These businesses lost more than 120,000 jobs. This is the largest number of job losses by small businesses since May 2020, said LPL Financial’s chief economist, Jeffrey Roach. Meanwhile, medium and large businesses actually saw gains in employment during the month.
The reasons behind the sharp decline, according to Nela Richardson, the chief economist at ADP, were a nervous consumer base and an uncertain macroeconomic environment impacting business confidence. The interesting thing about the trend is that small businesses normally keep their workforce during the holiday season to cater to the elevated demand from customers.
Federal Reserve rate cut odds soar to 89%
The disappointing jobs numbers right away heightened hopes of interest rate cuts by the Federal Reserve, and market pricing jumped to near 89% for a rate cut on December 10. Such a sharp increase to 89%, up from 67% last month, translates to increased optimism and confidence among investors, who are confident that soft labor market conditions will soon force the Fed to soften its stance on money policy. The probability, via the CME FedWatch Tool, increased to 89%, up from 88% the preceding day.
Commerce Secretary defends administration policies amid job losses
The Commerce Secretary, Howard Lutnick, has been very quick to defend the Trump administration’s trade policies, rejecting the notion that the decline in employment positions last month is associated with the imposition of tariffs. According to Lutnick, it is actually the government shutdown and the mass deportation plan that have slowed the hiring rate by small businesses, most of which are labor-intensive and dependent on immigrant labor.
The Commerce Secretary further predicted that “private employment rolls will rebalance and regrow” after such temporary disruptions, but sounded very confident about it, saying, “The numbers are gonna be fantastic” in 2026. Economists, on the other hand, are not so sure if the total decline can solely be attributed to temporary reasons, given the environment of “no hire, no fire” due to uncertainty on trade policy.
Hiring has been choppy of late as employers weather cautious consumers and an uncertain macroeconomic environment,” said ADP chief economist Nela Richardson in her Wednesday statement.
Variations within industries show economically mixed messages
The number of jobs lost is significantly high, with jobs lost by the professional and business services sector amounting to 26,000 jobs, and information-related companies losing 20,000 jobs. The manufacturing industry lost 18,000 jobs, and financial activities and the construction industry each lost 9,000 jobs, which clearly indicates that the uncertainty is affecting the white-collar and trades sectors equally.
Service-oriented industries were relatively more robust, with 33,000 jobs added by the education and health services industry, and 13,000 jobs by the leisure and hospitality industry. Natural resource and mining industries also added 8,000 jobs, although only 1,000 jobs were reported to have been added by the trade, transportation, and utilities industry.
The rate at which average wages are increasing annually eased to 4.4% among people working at the same jobs compared to the 4.5% rate reported in October, while an increase of 6.3% is recorded among people changing jobs when it comes to wages compared to last year. These mixed signals show tough times are faced by the US concerning managing inflation and, indirectly, the support offered to the economy by policymakers.
