Job Market Weakness Boosts December Rate Cut Odds

The US job market unexpectedly lost 32K private sector jobs in November, defying forecasts of a modest gain.
Small businesses saw the largest impact, cutting 120K jobs, while larger firms added 90K.
Weak labor data and missing federal reports have raised the likelihood of a December Fed rate cut to 89%, per CME FedWatch.
Regional and sector-specific losses point to broader economic softening as 2025 approaches.

Key Takeaways

A Job Market Red Flag

A sharp miss in ADP’s private payroll numbers for November has shifted the rate-cut calculus on Wall Street, reports GlobeSt. Instead of the expected gain of 40K jobs, the US economy lost 32K private sector jobs in November. The surprise drop raises concerns about hiring trends and overall economic momentum heading into 2025.

ADP’s Chief Economist, Dr. Nela Richardson, linked the broad slowdown to cautious consumer spending and overall economic uncertainty. She noted that small businesses were hit hardest, accounting for the bulk of job losses. Companies with fewer than 50 employees cut 120K jobs, while mid-sized and large firms added 90K jobs collectively.

Sector And Regional Strains

Several sectors saw notable job losses, including:

Professional and business services: -26K
Information services: -20K
Manufacturing: -18K
Financial activities: -9K

Regionally, the Northeast lost 100K jobs and the South shed 43K, while the West (+67K) and Midwest (+45K) showed strength.

Missing Data, Rising Uncertainty

A government shutdown has delayed key economic releases, including the Fed’s preferred inflation metric (PCE) and October jobs data. That’s left market watchers relying more heavily on private reports like ADP’s to gauge real-time economic conditions ahead of next week’s FOMC meeting.

The data gaps have also heightened disagreements among Fed officials. With some policymakers still advocating for a pause, others are now more inclined toward easing in light of cooling labor demand.

Why It Matters

With inflation trending down and job growth faltering, pressure is mounting on the Fed to shift toward rate cuts. Markets are now pricing in an 89% chance of a 25-basis-point cut, a sharp reversal from two weeks ago, when most expected rates to hold.

While final decisions will hinge on upcoming data—including the delayed November jobs report and PCE release—the latest ADP figures have already strengthened the case for monetary easing.