By Alicia Wallace, CNN
The US private sector lost jobs in June, the first negative month in more than two years, according to new data Wednesday from payroll provider ADP.
US employers lost an estimated 33,000 jobs, according to ADP’s monthly national employment report.
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The losses were driven largely by stalled hiring plans, Nela Richardson, chief economist for ADP said.
“Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month,” she said in a statement. “Still, the slowdown in hiring has yet to disrupt pay growth.”
ADP’s tabulations don’t always correlate with the official federal jobs report — for example, ADP’s March 2023 reading was eventually revised down to a net loss of 53,000 jobs, while the official jobs data shows a net gain of 48,000 private-sector jobs.
However, the trajectory of what ADP reports is sometimes looked to as a proxy for overall hiring and wage growth activity (at the time, March 2023 marked the slowest monthly gain since a decline in December 2020).
When the latest employment snapshot from the Department of Labor is released Thursday at 8:30 a.m. ET (one day early due to the July 4th holiday), economists expect it to show that 115,000 jobs were added in June. That’s a pullback from the 139,000 initially estimated for May, according to FactSet. They also expect the unemployment rate to increase by 0.1 percentage point, to 4.3%, which would be the highest jobless rate since October 2021.
How policy shifts could be impacting the labor market
Labor market data can often be a slow burn.
Typically, it takes a little time for economic shifts to be reflected in the numbers (with exceptions being major shocks, say, like a global pandemic).
The first six months of President Donald Trump’s second term in office have been marked by sweeping policy actions — including broad-based tariffs, deportations, federal spending cuts and government workforce layoffs — that have the potential to reshape the American economy and global order.
However, while it may take time for these policies to work their way through the economy and become clearer in economic data, the indirect impacts already are making their mark:
Job growth is becoming anemic, Ron Hetrick, senior labor economist at Lightcast, told CNN in an interview.
And it wasn’t supposed to be that way. Economists, markets and businesses alike were pretty sure they’d have one, if not two, rate cuts from the Federal Reserve by now that would have helped juice the economy (something Fed Chair Jerome Powell said himself Tuesday).
“We were starting to see some excitement toward the end of last year,” Hetrick said, referencing hiring plans conveyed to him by IT staffing companies. “When the uncertainty entered in, when the tariff uncertainty entered in, the Fed got nervous about changing rates, and you just saw all of that retracted overnight. All of these discussions, all of these [hiring] plans, everybody just said, ‘Well, not right now.’”
“There’s a difference between true economic weakness — which is no one’s buying my stuff, and I’m going to go out of business — and a lack of hiring because of uncertainty,” Hetrick said. “I don’t believe we have a weak labor market because the economy is poor. I think we have a weak labor market because companies don’t feel good.”
But that weakness ultimately could feed on itself and make the labor market — and economy — more vulnerable to shocks, cautioned Elizabeth Renter, senior economist at NerdWallet.
“It will be months or even years before we see the full effects of tariffs, federal cuts and immigration policies in the labor market,” she told CNN in an email. “But if we continue to see increasing weakness, these things may have a more resounding impact, as the labor market won’t be robust enough to weather a storm.”
How the unemployment rate could get fuzzy
The headline numbers from the May jobs report indicated that the labor market was cooling, but not collapsing. Employers added an estimated 139,000 jobs, while the unemployment rate held steady at 4.2%.
However, the guts of the report indicated that cracks were continuing to spread. Nearly 91% of the month’s job gains came from health care and leisure and hospitality.
The labor participation rate fell, and the main reason the unemployment rate didn’t budge was because more workers left the labor force.
The unemployment rate is a critical indicator of economic health; however, in part due to seismic shifts around immigration, it’s losing its luster and instead turning into a math problem.
“Unemployment is still low, but we’ve got to watch how we get to that unemployment number,” Hetrick said. “If you’re doing it because your labor force is shrinking, you’re not doing it through strength. You’re doing it through a math equation.”
Foreign-born workers, irrespective of legal status, have accounted for about three-quarters of total labor force growth since February 2020, according to an analysis released in June from Wells Fargo economists. And recent efforts to curtail unauthorized immigration are contributing to a shrinking of the labor force, they noted.
“Whereas immigration overstated the pace of labor market cooling last year, it could now paint an overly rosy picture of its health,” they wrote. “We expect the unemployment rate to peak at just 4.5% in the year ahead as weaker demand for workers coincides with weaker supply. Although this would mark a less abrupt increase than the rise in the unemployment rate that helped spur the Fed to ease monetary policy last year, the uptick amid a slowing supply backdrop (and from a higher starting point) would make the increase more precarious.”
What unemployment indicators are showing
The labor market is in a state of low churn: Hiring activity is running near 10-year lows and workers aren’t feeling confident enough to quit; however, employers, for the most part, are holding on to the workers they have.
Layoff activity hasn’t accelerated recently, according to weekly jobless claims data, layoff announcement reports, Worker Adjustment and Retraining Notification Act postings, and the government’s Job Openings and Labor Turnover Survey report.
On Wednesday, Challenger, Gray & Christmas released its latest report that tracks layoff announcements. In June, US-based employers announced 47,999 job cuts, marking a 49% decline from May and a 2% drop from June of last year.
Layoff announcements tend to decrease in June — a month when some companies’ fiscal year ends — and July, Challenger historical data shows.
Year to date, layoff announcements are running at the hottest rate since the pandemic and, before that, the Great Recession, Challenger noted.
However, a large chunk — nearly 40% — of the 744,308 announced cuts made in the first half of 2025 came from mass layoffs conducted by the Department of Government Efficiency initiative launched by the Trump administration with Elon Musk at the helm.
Still, plans can change, and announcements (or reported cuts) might not result in job losses. For example, not all federal workers were laid off immediately, some have been rehired, and other actions are being challenged in court.
Tuesday’s JOLTS data showed that layoffs fell in May from 1.79 million to 1.6 million, staying below pre-pandemic levels. The rate of layoffs remains near record lows.
The most recent jobless claims data will be released Thursday morning at the same time as the jobs report. First-time claims have slowly moved higher; however, continuing claims are running near four-year highs, indicating that people are having a harder time finding work.
“The early impacts of tariffs are just one drag on the job market,” Daniel Zhao, economist for Glassdoor, wrote last month. “A bevy of other headwinds are accumulating including federal layoffs and funding cuts, slowing immigration and revocation of TPS work authorization, high interest rates, and more. While each alone would be too small to cause a recession, the combination of headwinds risks decelerating the job market just before the full weight of the tariff shock arrives.”
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