New data from the United States has revealed a worrying contraction in the job market, casting a shadow over the health of the world's largest economy and increasing pressure on policymakers.
Surprise Job Losses Signal Broad Slowdown
A report released on Wednesday by payroll processing firm ADP delivered an unexpected blow. It showed that US private companies shed 32,000 jobs in November, a stark contrast to analyst forecasts which had predicted a net gain of 20,000 positions. This downturn has solidified market expectations that the Federal Reserve will implement an interest rate cut at its meeting next week.
ADP's chief economist, Nela Richardson, attributed the poor performance to employers navigating a tricky landscape. "Hiring has been choppy of late as employers weather cautious consumers and an uncertain macroeconomic environment," Richardson stated. She emphasized that while the slowdown was widespread, it was led by a significant pullback among small businesses.
Small Businesses Bear the Brunt, Creating a 'Start-to-Fire' Market
The data breakdown reveals a deep divide. While medium and large establishments managed to add jobs last month, small establishments were devastated, losing a staggering 120,000 jobs. This collapse among small firms, often considered the backbone of the American economy, points to severe underlying stress.
Heather Long, chief economist at Navy Federal Credit Union, described the current climate as a "start-to-fire job market." Long warned, "The only industries still hiring are hospitality and healthcare. If you don't want to work at a bar or in health care, you're out of luck." She directly linked the struggles of small businesses to President Donald Trump's barrage of tariff announcements, which have created widespread uncertainty.
Long further predicted that this challenging labor market is "likely to remain in place for the first half of 2026 until there's more certainty on tariffs and more confidence among businesses to begin hiring again."
Data Gaps Complicate Federal Reserve's Decision
The situation is further muddied by a significant lack of official economic data. A recent federal government shutdown, now ended, has left critical gaps. The Labor Department has not published employment data for October and has postponed the November report until December 16, which is after the Fed's crucial December 10 policy meeting.
This means the Federal Reserve will be forced to make its interest rate decision without key official employment and consumer pricing inputs. However, the weak ADP report has already shifted expectations. Fed officials have shown greater concern about the job market, leading analysts like Nationwide's Oren Klachkin to predict that "the doves will prevail" and vote for another 25 basis point interest rate reduction.
Klachkin added, "The report shows the job market is losing more momentum at year-end and skews risks toward modestly higher unemployment early next year."
Other economic indicators released on Wednesday presented a mixed picture. The services sector reported growth in November, but its employment index fell below the 50-point threshold that separates growth from contraction. A survey by the Institute for Supply Management found that multiple officials pointed to the lingering cloud surrounding trade policy as a primary concern, with one real estate official citing tariff uncertainty as a major source of complexity.
