US private payrolls post first drop in more than two years; layoffs still low
Reuters 2025-07-02T08:24:00-04:00
By Lucia Mutikani
WASHINGTON (Reuters) -U.S. private payrolls fell for the first time in more than two years in June as economic uncertainty hampered hiring, but low layoffs continued to anchor the labor market.
Private payrolls dropped by 33,000 jobs last month, the first decline since March 2023, after a downwardly revised increase of 29,000 in May, the ADP National Employment Report showed on Wednesday. Economists polled by Reuters had forecast the report would show private employment increasing by 95,000 following a previously reported gain of 37,000 in May.
There were job losses in the professional and business services, education and health services, and financial activities sectors. But the leisure and hospitality, manufacturing, and construction industries added jobs.
The ADP report, jointly developed with the Stanford Digital Economy Lab, was published ahead of the more comprehensive employment report for June due to be released on Thursday by the Labor Department's Bureau of Labor Statistics. There is no correlation between the ADP and BLS employment reports.
The BLS' employment report is being published a day early because of the Independence Day holiday on Friday. Economists shrugged off the decline in the ADP measure, noting its poor track record predicting the official payrolls count.
"Use ADP only to gauge the big picture," said Carl Weinberg, chief economist at High Frequency Economics.
"Right now, that picture shows ADP's private sector employment estimates declining steadily since December. Today's big drop underscores that decaying trend."
U.S. stocks were mixed in early trading. The dollar rose versus a basket of currencies. Longer-dated U.S. Treasury yields rose.
TRADE POLICY UNCERTAINTY
Job growth has ebbed as businesses grapple with trade policy uncertainty, but companies have not yet resorted to widespread layoffs, keeping the labor market afloat.
A separate report from global outplacement firm Challenger, Gray & Christmas showed job cuts announced by U.S.-based employers totaled 47,999 in June, a drop of 49% from the prior month.
Planned layoffs totaled 247,256 in the second quarter, down 50% from the first quarter. The number of planned hires, however, dropped to 3,191 last month from 9,683 in May.
Sluggish hiring also was evident in the release on Tuesday of the government's Job Openings and Labor Turnover Survey, or JOLTS report. It showed hires at 5.503 million in May, a decline of 112,000, and 1.07 job openings for every unemployed person in May, up from 1.03 in April.
"Without a strong economic driver, hiring may remain measured through the rest of the year," said Andrew Challenger, senior vice president at Challenger, Gray & Christmas.
Economists polled by Reuters expect the government's employment report to show private payrolls increased by 105,000 in June after rising by 140,000 in May.
Overall nonfarm payrolls are estimated to have advanced by 110,000 jobs after a gain of 139,000 in May. The unemployment rate is forecast to climb to 4.3% from 4.2% in May.
Economists said it was unclear whether Republican President Donald Trump's massive tax-cut and spending bill, which was narrowly passed by the U.S. Senate on Tuesday, would stimulate hiring. The bill, which nonpartisan analysts say will add $3.4 trillion to the nation's debt over the next decade, faces a vote in the House of Representatives. Republicans control both houses of Congress.
Economists expect the Federal Reserve to resume cutting interest rates in September. The U.S. central bank last month left its benchmark overnight interest rate in the 4.25%-4.50% range where it has been since December.
Fed Chair Jerome Powell on Tuesday reiterated the central bank's plans to "wait and learn more" about the impact of tariffs on inflation before lowering interest rates again.
"We are sticking with our forecast for a 100,000 increase in private payrolls in June, still a material step down from the average 197,000 initially reported rise over the previous six months, but probably strong enough to rule out a July rate cut," said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. "We see the Fed waiting until September."
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)
