Following disappointing civilian payroll data for November, predictions for a rate cut at the upcoming Federal Reserve meeting have significantly increased. Commerce Secretary Howard Lutnick emphasized that the recent job figures are not related to President Trump’s tariffs.
According to the ADP National Employment Report released on Wednesday, the U.S. private payroll saw a loss of 32,000 jobs last month, with small businesses experiencing the most significant drops. Interestingly, job growth for October was revised upward by 47,000.
The November employment figures fell short of expectations. Economists surveyed by FactSet had anticipated an increase of 40,000 jobs, while Reuters and Bloomberg estimated rises of just 10,000 and 5,000, respectively.
With the weak report, the chances of a 0.25% rate cut at the Fed’s meeting on December 10 surged to nearly 89%, a notable rise from 88% the previous day and 67% a month earlier, according to CME FedWatch.
Lutnick attributed the sluggish job growth in November to the recent government shutdown and mass deportations, dismissing the impact of trade policies. “No, no, it’s not a tariff,” he stated on CNBC’s “Squawk on the Street.”
“Remember, the Democratic government was shut down, right?” he added. “And don’t forget that deporting people suppresses the number of small and medium-sized private sector jobs.”
He remained optimistic, suggesting that this is merely a temporary setback, and that civilian salaries are likely to “readjust and grow again.” “Next year will be great numbers,” he claimed.
The ADP report, which uses pay data from over 26 million U.S. employees, often diverges from official government statistics.
Because of the recent government shutdown, the private jobs report carries extra weight; it’s one of the few insights into the labor market before the Fed’s upcoming meeting.
Chris Zaccarelli, chief investment officer at Northlight Asset Management, noted that the ADP data aligns with what many dovish economists have been expressing—that the focus should be on the weakening labor market instead of inflation.
Inflation remains high, hitting around 3% in September, per the latest federal data. In a surprising twist, employers actually added 119,000 jobs last month, yet the unemployment rate rose to 4.4%, the highest since October 2021, according to the Bureau of Labor Statistics.
“Employment has been volatile lately as employers navigate cautious consumers and an uncertain macroeconomic landscape,” ADP Chief Economist Nella Richardson mentioned.
She pointed out that the economic slowdown in November was widespread, particularly affecting small and medium-sized businesses.
Over 120,000 jobs were eliminated in November, and companies with fewer than 50 employees faced the steepest losses, while larger firms managed to add staff.
Remarkably, this marks the largest layoff number for small businesses since May 2020, according to LPL Financial’s Chief Economist Jeffrey Roach.
Job growth among larger companies showed mixed results. Professional and business services reported a decline of 26,000 jobs, while the information sector saw a drop of 20,000. The manufacturing sector lost 18,000 jobs, and both financial activities and construction shed 9,000 jobs each.
On a brighter note, consumer industries showed strength. Education and health services added 33,000 jobs, leisure and hospitality increased by 13,000, and trade, transport, and public works gained 1,000 jobs, with natural resources and mining adding 8,000.
However, wage growth has slowed, with an annual increase of 4.4% for employees staying in the same roles, down from 4.5% in October.
For those changing jobs, wages rose 6.3% year-on-year in November, although this too has slowed from October’s 6.7% rate.
Economic reports continue to show mixed signals. Major U.S. companies like McDonald’s and Walmart have noted significant disparities in spending habits between higher and lower-income consumers.
While households earning $100,000 or more are continuing to spend, lower-income groups are pulling back on non-essential purchases.
The Bureau of Labor Statistics is set to release the November employment report on December 16, although it was initially expected this Friday. This report will include October’s non-farm employment data, but the October unemployment rate will not be revealed due to data collection issues caused by the government shutdown.
