U.S. labor market slows: ADP reports weak hiring, rising layoffs in tech sector

The slowdown was particularly pronounced in certain sectors:

• Professional and business services lost 16,000 jobs
• Manufacturing sector lost 8,000 jobs
• Information services saw a drop of 4,000 jobs

However, some sectors continued to create jobs:

• Education and health services increased by 29,000
• Construction created 27,000 jobs
• Financial activities gained 18,000 jobs

Layoffs are on the rise

The slowdown in hiring has been accompanied by an increase in layoffs. August saw the highest number of job cuts in 15 years, according to Challenger, Gray & Christmas. The tech sector was particularly hard hit, with 41,829 job cuts announced, the most in 20 months.

Productivity and labor costs

In a separate report, the Bureau of Labor Statistics found that labor productivity in the nonfarm business sector increased 2.5 percent in the second quarter of 2024. This was accompanied by a modest 0.4 percent increase in unit labor costs, reflecting a 3.0 percent increase in hourly compensation partially offset by productivity gains.

Initial unemployment benefit claims

The latest data on initial jobless claims showed a slight improvement, with 227,000 claims filed in the most recent week, below the 230,000 estimate. Still, that figure is high by historical standards.

Market forecast

The slowdown in the labor market is likely to influence the Federal Reserve’s upcoming monetary policy decisions. Markets are now pricing in a cut of at least a quarter of a percentage point at the September meeting, with expectations of a full percentage point reduction by the end of 2024.