U.S. stock markets opened lower on Wednesday after fresh data from ADP showed a surprise decline in private-sector employment, shaking investor confidence and sparking new speculation about the Federal Reserve’s next move on interest rates.
According to the ADP National Employment Report, the U.S. private sector lost 33,000 jobs in June—a stark contrast to market expectations of job growth and the first monthly decline in private payrolls since early 2023.
The report points to signs of a cooling labor market, particularly in small and midsize businesses.
Following the release, the Dow Jones Industrial Average dipped by around 75 points (0.17%) in early trading.
The broader S&P 500 edged down 0.1%, while the tech-heavy Nasdaq Composite remained flat as traders weighed potential implications for interest rates and the overall economy.
Cooling Labor Market Raises Fed Cut Bets
The unexpectedly weak employment data immediately fueled speculation that the Federal Reserve may accelerate its timeline for cutting interest rates.
Futures markets responded quickly, with the probability of a rate cut in July rising above 25%, according to CME’s FedWatch tool.
“This report marks a clear shift in labor market momentum,” said Dana Peterson, chief economist at The Conference Board. “While one report doesn’t make a trend, a negative print will definitely influence sentiment, especially with the Fed on edge about over-tightening.”
Sector Breakdown: Services Lead the Losses
The job losses were led by the services sector, particularly in leisure and hospitality, retail, and professional business services.
Meanwhile, large companies managed to post modest gains, but small businesses bore the brunt of the decline, shedding over 50,000 jobs.
ADP Chief Economist Nela Richardson emphasized that while hiring had slowed in recent months, June’s negative figure reflects broader adjustments across the labor market as employers respond to high borrowing costs and slower demand.
Market Watchers Eye Official Jobs Data
Investors now turn their attention to Friday’s Bureau of Labor Statistics (BLS) non-farm payrolls report, which could confirm—or contradict—the trends flagged by ADP.
“Markets will be watching closely to see if the government’s data lines up with this signal from ADP,” said Jim Paulsen, chief strategist at The Leuthold Group.
“A second weak print would solidify the case for a rate cut, possibly as soon as this summer.”
Also Read
U.S. Private Sector Sheds 33,000 Jobs in June, First Decline Since 2023
Meta Goes All-In on Artificial Intelligence: Zuckerberg’s Boldest Bet Yet