US Private Payroll Growth Slows in November, Falling Short of Expectations

The U.S. private payrolls growth rate slowed down in November, falling slightly below market expectations. According to the ADP National Employment Report, private payrolls rose by 146,000 jobs last month, following a downwardly revised increase of 184,000 in October. Economists had forecast a gain of 150,000 positions, after a previously reported jump of 233,000 in October.

The report, jointly developed with the Stanford Digital Economy Lab, was published ahead of Friday's more comprehensive and closely watched employment report for November from the Labor Department's Bureau of Labor Statistics. It is important to note that there is no correlation between the ADP and BLS employment report, as initial ADP prints have mostly understated private payroll growth this year.



An acceleration in job growth was anticipated in November after being severely curtailed by Hurricanes Helene and Milton, as well as strikes by factory workers at Boeing and another aerospace company. Private payrolls likely rebounded by 200,000 jobs last month, after declining by 28,000 in October. This would account for all the expected 200,000 increase in nonfarm payrolls. The economy added only 12,000 jobs in October, the fewest since December 2020. The unemployment rate is forecast to rise to 4.2% from 4.1% in October.



Job growth in the goods-producing sector added 6,000 jobs in November, with the construction industry leading the way (30,000 jobs). Conversely, manufacturing employment declined (-26,000 jobs). Service-providing employment grew by 140,000 jobs, with notable gains in education/health services (50,000 jobs) and professional/business services (18,000 jobs). The stronger performance in construction and service sectors may signal a continued recovery in these areas, while the manufacturing decline could be a temporary setback.

The report also revealed a mixed performance across establishment sizes. Large establishments (500+ employees) led the growth, adding 120,000 jobs, while medium establishments (50-499 employees) contributed 42,000 jobs. Small establishments (1-49 employees) saw a decline of 17,000 jobs. This suggests that larger companies are more actively hiring, potentially indicating a stronger economy. However, the decline in small establishments may indicate a slowdown in hiring among smaller businesses.

As we approach the end of the year, investors should closely monitor the labor market trends and the Federal Reserve's policy decisions. The Fed has indicated that it is open to further interest rate cuts, but the recent economic data and rising bond yields may slow down the pace of these cuts in the coming months. With the presidential election over and the prospect of change coming to Washington, the focus will shift to the state of the labor market and the economy's performance.

Investors should also consider the potential impact of President-elect Trump's economic proposals, such as the proposed 25% tariffs on imports from Canada and Mexico, as well as the additional 10% levy on imports from China. These tariffs could lead to higher prices and increased inflation, which could affect market sentiment and the Fed's policy decisions.

The year-end data on the job market and the focus on the Federal Reserve will provide valuable insights into the economic outlook and the potential impact on financial markets. Investors should carefully evaluate the data and the potential consequences of policy decisions to make informed investment decisions.

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