The weak trend in private payrolls data continues, with new hiring on hold and employers refusing to replace departed workers. The ADP report also reflects the negative impact of the higher tariffs on small and medium-sized businesses.

The ADP national employment report shows 33,000 jobs cut from private payrolls in June after a downward revision to just 29,000 jobs added in May (previously +37,000). The June decline is nowhere near the consensus of up 103,000 in the Econoday survey of forecasters.

By sector, there was a significant drop-off in hiring within service-providing industries while goods-producers saw a small rebound.

Annual wage growth, however, remained robust up 4.4 percent compared to June 2024.
Service-providers' payrolls are down 66,000 in June. There are decreases of 52,000 in education and health services, -56,000 in professional services, and -14,000 in financial activities. There are increases of 32,000 in leisure and hospitality, 14,000 in trade, 5,000 in information, and 5,000 in other services.

Goods-producers' payrolls are up 32,000 in June with increases of 9,000 in construction, +8,000 in natural resources and mining, and +15,000 in manufacturing.

Payrolls are up only for large establishments in June. Small firms (1-49 employees) shed 47,000 jobs, medium firms (50-499) cut 15,000, and large firms (500+) added 30,000.

The ADP pay insights report noted that the median annual increase for pay for job-stayers is up 4.4 percent from June 2024. This compares to +4.5 percent in May and the lowest since up 4.4 percent in June 2021. For job-changers, the June year-over-year increase is 6.8 percent. This is down from 7 percent in May, and consistent with the past six months.

Private payrolls expected up 103K after rising only 37K in May.

The national employment report from Automated Data Processing Inc. is computed from ADP payroll data and offers advance indications on the U.S. workforce. ADP's data cover more than 500,000 companies totaling more than 25 million employees. The report is produced by ADP Research Institute in collaboration with Stanford Digital Economy Lab.

Market players have become accustomed to the excitement on employment Friday and realize the rich detail of the monthly employment situation can help set the tone for the entire month. While economists have improved their nonfarm payroll forecasts over the years, it is not unusual to see surprises on employment Friday. To that end, the ADP's national employment report can help improve the payroll forecast by providing information in advance of the employment report.

The employment statistics also provide insight on wage trends, and wage inflation is high on the list of enemies for the Federal Reserve. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus.

By tracking jobs, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.