America’s private sector unexpectedly lost 33,000 jobs in June, marking the first employment decline in over two years and signaling a concerning shift in what had been a resilient labor market under President Trump’s administration.
Key Takeaways
- U.S. private payrolls dropped by 33,000 jobs in June, the first decline since March 2023, dramatically missing economists’ expectations of 95,000-100,000 job gains
- Professional services, education, health services, and financial sectors suffered losses, while leisure, hospitality, manufacturing, and construction showed growth
- Small businesses bore the brunt of job cuts while larger companies continued to add workers
- Despite the employment decline, worker pay increases continued with annual wages up 4.4% for job stayers and 6.8% for job changers
- The Midwest and Western regions experienced the largest job contractions, while the Southern U.S. maintained positive job growth
Private Sector Employment Drops for First Time Since 2023
The U.S. labor market unexpectedly stumbled in June as private sector employers cut 33,000 jobs, according to data released by ADP. This marked the first monthly decline since March 2023 and represented a dramatic miss compared to economists’ expectations, who had forecast an increase of 95,000 to 100,000 jobs. The surprising downturn adds to mounting evidence that the labor market is cooling significantly despite President Trump’s economic initiatives, with job creation slowing consistently since December 2024.
“Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month,” said Nela Richardson, ADP’s chief economist.
Sector and Geographic Disparities Reveal Economic Fault Lines
The employment decline wasn’t uniform across all sectors. Professional and business services, education and health services, and financial activities sectors experienced significant job losses, dragging down the overall numbers. Meanwhile, leisure and hospitality, manufacturing, and construction industries managed to add jobs, though not enough to offset losses elsewhere. This uneven distribution suggests structural changes in the economy rather than a universal slowdown.
“Use ADP only to gauge the big picture,” said Carl Weinberg, chief economist at High Frequency Economics. “Right now, that picture shows ADP’s private sector employment estimates declining steadily since December. Today’s big drop underscores that decaying trend.”
Geographic disparities were equally telling, with the Midwest and Western regions of the United States experiencing the largest job contractions. The Southern states bucked the trend by continuing to add jobs, reinforcing the economic strength of Republican-led states that have embraced President Trump’s economic policies. Company size also factored into the employment picture, with smaller firms suffering more job losses compared to larger companies that maintained payroll growth.
Mixed Signals on the Employment Front
While the headline numbers paint a concerning picture, other employment indicators send contradictory signals. Challenger, Gray & Christmas reported a 49% drop in job cuts in June compared to May, with planned layoffs in the second quarter down 50% from the first quarter. This suggests employers aren’t actively terminating workers but are instead hesitant to replace those who leave voluntarily. The reduction in planned hires, which fell from 9,683 in May to just 3,191 in June, further illustrates this cautious approach.
“Without a strong economic driver, hiring may remain measured through the rest of the year,” said Andrew Challenger, senior vice president at Challenger, Gray & Christmas.
Despite the slowdown in hiring, employee compensation continues to rise. Workers who stayed in their positions saw annual pay increase by 4.4% in June, while those who switched jobs enjoyed even larger gains at 6.8%. This wage growth, though slightly down from previous months, indicates employers are still willing to pay more to retain and attract talent in certain sectors, even as overall hiring slows.
Trump’s Economic Vision Amid Employment Challenges
President Trump has responded to the employment data by emphasizing his broader economic vision and accomplishments. He points to significant investment inflows into the United States and tariff revenues as indicators of economic strength that will eventually translate into job growth. The administration is focusing on the transition period as Trump’s economic policies take full effect following the previous administration’s approach.
“Trillions of Dollars are now being invested into the USA, more than ever before. Likewise, hundreds of Billions of Dollars in Tariffs are filling up the coffers of the Treasury. The Tariff money has already arrived and is setting new records!” Trump wrote. “We are growing our way out of the Sleepy Joe Biden MESS that he and the Democrats left us, and it is happening much faster than anyone thought possible. Our Country will make a fortune this year, more than any of our competitors, but only if the Big, Beautiful Bill is PASSED!”
Looking ahead, economists expect the government’s official employment report to show an increase of 105,000 private payrolls in June, with overall nonfarm payrolls rising by 110,000 jobs. The unemployment rate is forecast to edge up to 4.3% from 4.2% in May. However, many experts caution against putting too much stock in the ADP report, which has a poor track record in predicting official payroll counts and isn’t directly correlated with the Bureau of Labor Statistics employment report.
