ADP Data Shows Modest Job Growth, Highlighting Ongoing Challenges for Small Business Investors

Think of the job market like a big sports team—sometimes different players are doing well, while others are struggling. What happens with jobs in different sectors can have a big impact on your investments, just like how every player affects the whole game.

Which Sectors Are Winning and Losing?

Some parts of the economy are hiring lots of workers, while others are letting people go. This matters because it shows where businesses are growing or slowing down—key info for investors.

• Winners: The biggest job gains were in trade, transportation, and utilities, which added 47,000 jobs. Education and health services also did well, adding 26,000 jobs.
• Losers: Tech-heavy information services cut 17,000 jobs, even though there’s lots of talk about artificial intelligence. Professional and business services lost 15,000 jobs, and manufacturing dropped by 3,000. Factories are still having a tough time, even with tariffs that should help them.

Wages: Holding Steady, But Not Soaring

People are still getting pay raises, but those increases aren’t getting bigger. For example, people who stayed in their jobs got a 4.5% raise compared to last year. People who switched jobs did a bit better, with a 6.7% raise. But overall, pay increases are slowing down. This suggests the job market isn’t as hot as it was in 2022.

• According to the Federal Reserve, wage growth in the U.S. averaged around 6% in 2022, but has slowed to about 4.5% in 2023 (source).

Why This Report Matters More Than Usual

Normally, investors pay more attention to official government job numbers from the Bureau of Labor Statistics (BLS). However, with the BLS temporarily closed, investors are relying on the ADP jobs report. Before the shutdown, experts thought we’d see 60,000 fewer jobs and higher unemployment, which would have made the Federal Reserve more likely to cut interest rates soon. Instead, the ADP report showed a small gain in jobs, making quick rate cuts less likely for now.

Bulls vs. Bears: What Are the Pros and Cons?

• Bulls (Optimists):
  • Some sectors are still hiring steadily, showing that parts of the economy are growing.
  • Wages are not falling, which supports consumer spending and company profits.
  • Big companies are still adding jobs, which can help keep markets stable.
• Bears (Pessimists):
  • Job growth is slowing overall, especially in tech and manufacturing, which could hurt certain stocks or funds.
  • Wage growth is losing steam, which could signal trouble for future spending and company earnings.
  • Smaller businesses are pulling back, which could mean more layoffs or less job security ahead.

Historical Context: How Does This Stack Up?

When job growth slows but doesn’t collapse, it often signals a “soft landing” for the economy—meaning things are cooling off but not crashing. For example, in 2016 the U.S. saw slower job growth, but avoided a recession and markets eventually rebounded (source).

Investor Takeaway

• Check your portfolio for exposure to sectors losing jobs, like tech and manufacturing, and consider rebalancing if needed.
• Don’t expect rapid interest rate cuts from the Federal Reserve—plan for rates to stay steady for a while.
• Watch wage growth and hiring in big companies as signals for consumer and market strength.
• Stay cautious with riskier, labor-sensitive assets until job growth shows more strength.
• Keep an eye on future jobs reports—more data will help confirm if the market is heading for a soft landing or something bumpier.

For the full original report, see FX Empire