ADP Reports Surprise 42K Job Gain, But Small Business Losses Flag Labor Market Strain

Sector Breakdown: Mixed Bag Beneath the Headline The strongest hiring came in trade, transportation, and utilities (+47,000), with education and health services also contributing (+26,000). But the picture was far from universally strong. Tech-heavy information services cut 17,000 positions — despite all the hype around AI. Professional and business services (-15,000) and manufacturing (-3,000) also pulled back. The factory sector remains a drag, even with tariff support still in play.

Wages Steady, But Growth Is Flatlining Pay growth is holding but not accelerating. Job stayers saw a 4.5% year-over-year increase in October, unchanged from September. Job switchers did slightly better at 6.7%, up a tick. Still, wage gains appear to be losing momentum, a sign the labor market isn’t nearly as tight as it was in 2022. That lines up with ADP’s comment that “shifts in supply and demand are balanced.”

With BLS Offline, This One Matters Traders usually discount the ADP print — but not this time. With the BLS shuttered, markets have to lean on what’s available. Before the shutdown, expectations were for a decline of 60,000 jobs in the official report and a rise in unemployment to 4.5%. That kind of signal would’ve supported more aggressive Fed easing. Now, with a modest private-sector beat in hand, the case for immediate rate cuts looks a bit softer.

Bottom Line: Cautious Optimism — But Don’t Chase It October’s ADP print calms some nerves, but this isn’t a strong labor rebound. Big firms are still hiring, but the broader trend points to a cooling market — especially under the surface. With wage growth stalling and smaller businesses in retreat, the Fed may stay on hold, but it’s not a green light for risk-on trades. The bias remains cautiously bearish for labor-sensitive assets until more data proves otherwise.

More Information in our Economic Calendar.