ADP Employment Report Signals Labor Market Rebound After Weeks of Declines

U.S. private-sector hiring showed early signs of stabilizing in late November, with new ADP data pointing to a modest pickup in job creation after weeks of contraction, even as small businesses continue to shoulder the brunt of labor-market weakness.

In its latest NER Pulse update, payroll processor ADP said private employers added an average of 4,750 jobs per week in the four weeks ending Nov. 22. The positive job creation data—released on Dec. 9 alongside a blog post from ADP chief economist Nela Richardson—marks the first weekly improvement after four straight weeks of negative readings.

“This week’s positive number hints at an upswing in the labor market after four straight weeks of negative pulse estimates,” Richardson wrote in her post.

“These numbers are preliminary and could change as new data is added.”

The snapshot arrives amid heightened reliance on private-sector indicators, as the federal shutdown delayed key government releases, including the monthly nonfarm payrolls report.

Small Businesses Under Pressure

The tentative improvement comes against a backdrop of deeper labor-market softening led by small employers, long considered the backbone of U.S. job creation.

Last week’s ADP National Employment Report for November showed that firms with fewer than 50 workers shed 120,000 jobs, offsetting gains of 90,000 across medium and large businesses. Over the prior three months, from August through October, small establishments had already been losing an average of 34,000 jobs per month.

“Small employers don’t often get the Cinderella-story recognition they deserve from economists and market-watchers,” Richardson wrote.

“But a peek under the hood of the labor market shows just how vital and mighty these small firms are.”

November’s losses were broad-based: professional and business services, manufacturing, information, and construction all contracted, while only education, health care, and natural resources posted gains.

Regionally, small-business job cuts were concentrated in New England and the Mid- and South-Atlantic, while the West Coast, Mountain states, and upper Midwest saw modest increases.

Economists closely track small-business employment because these firms tend to be more sensitive to shifts in macroeconomic conditions and often serve as a bellwether. Small businesses account for more than 40 percent of U.S. employment, 96 percent of establishments, and a majority of hiring in key industries such as construction and leisure and hospitality.

“Main Street businesses are more vulnerable to macro headwinds, and they’re typically the first to respond to slowing economic conditions,” Richardson wrote.

“By the same token, small firms also typically take the lead in hiring when macro conditions turn positive.”

ADP’s positive job creation figures dovetail with a new report from the National Federation of Independent Business, which showed that small-business hiring plans have jumped to a 12-month high, hinting at further firming of the labor market in the months ahead.

A Labor Market Near Stall Speed?

The latest data contrasts with ADP’s earlier weekly estimates, which showed job losses. For the four weeks ending Nov. 1, employers trimmed an average of 2,500 jobs per week, following a prior period in which firms shed 11,250 per week. Separate ADP figures for early November showed losses accelerating to an average of 13,500 per week.

Economists have described current conditions as a “low-fire, low-hire” environment—marked by muted hiring, fewer layoffs, and a labor force diminished by retirements and declining participation. New hires have accounted for a growing share of recent job creation, Richardson noted in an earlier post, largely because employers are replacing departing workers rather than expanding payrolls.

The demographic drag on the labor market remains substantial. According to Richardson, 36 percent of U.S. workers are now 55 or older, up more than 10 percentage points from 2015. Participation has also slipped: 62.3 percent in August, down from 63.3 percent before the pandemic.

Meanwhile, wage growth is cooling. Median year-over-year pay gains for job-stayers eased to 4.4 percent in November, and new-hire pay growth has slowed to just 1.7 percent annually.

The ADP data arrives as the Federal Reserve begins its Dec. 9–10 policy meeting, offering the last comprehensive private-sector read on hiring before officials debate whether to cut interest rates for a third straight time.

Fed Governor Christopher Waller has repeatedly highlighted weakening labor conditions as justification for another 25-basis-point cut, saying that “evidence of a weak labor market” now outweighs concerns about inflation.

Other policymakers, including Boston Fed President Susan Collins, have urged caution, citing still-elevated price pressures and a job market that remains “relatively healthy.”

Jobless claims—one of the few uninterrupted weekly government indicators—fell to a three-year low last week, raising hopes the slowdown may be easing. An update later this week on the state of unemployment filings will offer further confirmation whether the improvement is fleeting or has momentum that could build into a more durable trend.

Richardson sees small firms as the likely leaders of any eventual rebound.

“When hiring pulls out of its slowdown and starts scoring wins,” she wrote, “small businesses will be the economy’s MVPs.”

More labor-market clarity will come next week, when delayed Bureau of Labor Statistics data—in particular, job creation figures for November—finally resumes publication.