Says ADP, the private sector experienced a net job loss of 33,000 positions in June, falling significantly short of anticipated figures
The U.S. private sector experienced a slower pace of job growth in June, as indicated by the latest ADP National Employment Report. The report revealed a loss of 33,000 jobs, a significant decrease from the 37,000 jobs added in May, which is the lowest in over two years.
The slowdown in hiring can be attributed to several factors, including increased tariffs, geopolitical tensions, policy uncertainty, hesitancy to hire, and sector-specific challenges. The tariff hikes have introduced economic uncertainty, affecting business confidence and investment, while geopolitical tensions, such as the Israel-Iran conflict, contribute to global instability that can influence hiring decisions.
Policy uncertainty, due to lack of clear direction and potential changes in regulations, has also made businesses hesitant to expand or hire new employees. This hesitancy, coupled with a reluctance to replace departing workers, has led to a cautious approach to hiring, as stated by Nela Richardson, ADP's chief economist.
Sector-specific challenges have also played a role in the slowdown, with job losses notably higher in service-providing sectors like professional and business services, education, and health services. This sectoral impact suggests that specific industries are facing unique challenges that are exacerbating the broader slowdown.
Despite the slowdown in job growth, the Labor Department's nonfarm payrolls report, due for release on Friday morning, is expected to show an increase of 110,000 positions, although this is below the 139,000 reported in May.
On a positive note, the annual pay for job-stayers decreased slightly to 4.4% in June from 4.5%, and annual pay for job changers decreased to 6.8% from 7%. Sectors such as manufacturing led job creation in June, adding 15,000 positions, while natural resources and mining added 8,000 jobs. Large businesses (500 or more employees) also added 30,000 jobs in June.
However, sectors like education and health services experienced significant job losses, shedding 52,000 jobs, and financial services and establishments with fewer than 50 employees also saw declines, losing 14,000 and 47,000 jobs respectively. Professional and business services experienced the most job losses, with a decline of 56,000.
Torsten Slok, the Apollo chief economist, elaborated on the risks facing the U.S. economy on 'Barron's Roundtable'. As the economy navigates these challenges, it remains to be seen how the job market will recover and whether the slowdown in hiring will persist.
The slowdown in hiring, as indicated in the ADP National Employment Report, may impact the overall economy, raising questions about business growth and finance. The hesitancy to hire, combined with sector-specific challenges in industries such as education, health services, and professional and business services, could have long-term consequences for economic recovery.
