US private employers shed 32,000 jobs in November

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Private employers in the US shed 32,000 jobs in November as smaller companies cut back on positions, according to unofficial data that has become a prominent indicator of the health of the world’s top economy.

Wednesday’s figure from payroll processor ADP compares with expectations of a 10,000-job gain among economists polled by Bloomberg and an upwardly revised 47,000 increase the previous month. 

The job losses were led by smaller companies with fewer than 50 employees, which shed 120,000 posts. The report will boost the case for the Federal Reserve to cut interest rates for a third time this year when its policy-setting committee meets next week.

“The labour market is not weak but it is weakening — and the first to crack is smaller establishments,” said Nela Richardson, ADP’s chief economist.

“I see them as a canary in the coal mine. Things could shift but small firms are the leading indicator of what’s going on nationally. And, right now, they’re signalling weakness.”

The ADP report has been closely watched by investors and policymakers in recent months after the federal government shutdown, which ended in mid-November, caused some reports to be delayed and others scrapped. 

The official November employment report from the Bureau of Labor Statistics has been postponed until December 16, after the Fed meets on December 9-10 to vote on borrowing costs.

The central bank’s Federal Open Market Committee has been split over the scale and pace of rate cuts, with more dovish members favouring greater action to bolster the labour market. More hawkish members prefer to wait until the effects of new tariffs on inflation become clear.

“This morning’s ADP data confirm what a lot of the doves are saying — it’s more important to focus on a weakening labour market than to worry about inflation,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management.

Abiel Reinhart at JPMorgan said Wednesday’s report “should keep the Fed concerned about job growth heading into its upcoming December 9-10 meeting”.

Short-term US government bond yields, which are sensitive to expectations for monetary policy, fell slightly after the report. The two-year Treasury note yield was down 0.04 percentage points to 3.47 per cent.

ADP said wage growth fell from 4.5 per cent in October to 4.4 per cent in November.

Construction groups shed 9,000 jobs and manufacturing 18,000, while information and professional and business services cut positions by 20,000 and 26,000, respectively. Education and health services and leisure and hospitality posted respective gains of 33,000 and 13,000.

Richardson said it had been “a tough year for small business” in particular as consumers dialled back spending amid economic upheaval.

“It is those mom-and-pop Main Street companies, firms, small businesses and establishments that are really weathering an uncertain macro environment and a cautious consumer,” she said.