Private payrolls in the United States saw their largest decline in two-and-a-half years during September, according to new data from ADP released on Wednesday.
Companies cut a seasonally adjusted 32,000 jobs last month, the biggest drop since March 2023. The figure was far weaker than expected, as economists surveyed by Dow Jones had forecast an increase of 45,000 jobs.
Markets reacted quickly. S&P 500 futures slipped 0.4%, while Nasdaq 100 futures fell 0.5% in premarket trading.
The September report also revised August’s numbers lower. Instead of a previously reported gain of 54,000 jobs, ADP now shows a decline of 3,000 positions.
Analysts said the message is clear. “While ADP doesn’t correlate precisely with BLS, it does provide directional insight, and the message is unmistakable,” noted Adam Crisafulli of Vital Knowledge.
The weak jobs report has fueled expectations that the Federal Reserve may deliver two more interest-rate cuts before the end of 2025. Traders are now closer than ever to fully pricing in this scenario, following the September Fed meeting where Chair Jerome Powell stressed the importance of incoming economic data.
The disappointing labor data arrives during a government shutdown that has created a data blackout. This means the Labor Department’s monthly employment report will likely not be released on Friday. Other key releases — including CPI, retail sales, durable goods, GDP, and weekly jobless claims — are also expected to be delayed.
Despite the slowdown, economists at Morgan Stanley said the weakness appears to come from slower hiring rather than layoffs. “The slowdown in labor demand is still contained. Layoffs have remained low; it’s hiring that has slowed,” they wrote.
For traders, the ADP report is another signal that the U.S. labor market is losing momentum, reinforcing expectations of more Fed rate cuts by December.
