CNN
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The first six months of President Donald Trump’s second term in office have been marked by sweeping policy actions — including broad-based tariffs, deportations, federal spending cuts and government workforce layoffs — that have the potential to reshape the American economy and global order.
While it may take time for these policies to work their way through the economy and become clearer in economic data, the indirect impacts already are making their mark.
The US private sector lost jobs in June, the first negative month in more than two years, according to new data Wednesday from payroll provider ADP.
US employers lost an estimated 33,000 jobs, according to ADP’s monthly national employment report.
Economists were expecting ADP’s report to show a net gain of 115,000 jobs, according to FactSet.
The losses were driven largely by stalled hiring plans, Nela Richardson, chief economist for ADP said.
“Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month,” she said in a statement. “Still, the slowdown in hiring has yet to disrupt pay growth.”
ADP’s tabulations don’t always correlate with the official federal jobs report — for example, ADP’s March 2023 reading was eventually revised down to a net loss of 53,000 jobs, while the official jobs data shows a net gain of 48,000 private-sector jobs of the overall 85,000 jobs added (largely due to a 30,000-job lift then from state and local governments).
However, the trajectory of what ADP reports is sometimes looked to as a proxy for overall hiring and wage growth activity. At the time, March 2023 marked the slowest monthly gain since a decline in December 2020.
When the latest employment snapshot from the Department of Labor is released Thursday at 8:30 a.m. ET (one day early due to the July 4th holiday), economists expect it to show that 115,000 jobs were added in June. That’s a pullback from the 139,000 initially estimated for May, according to FactSet.
They also expect the unemployment rate to increase by 0.1 percentage point, to 4.3%, which would be the highest jobless rate since October 2021.
Wednesday’s ADP tally is the first negative reading since March 2023 and, when considering unrevised first reports, it’s the first negative reading anytime in the past few years, noted Abiel Reinhart, economist at JPMorgan.
During the past year, the average absolute error between ADP and the BLS number has been about 75,000 the past year, Reinhart said, noting that one reason for the discrepancy is that the BLS number is higher on first estimate and revised downward.
“But the bigger story here beyond the month-to-month forecasting performance of ADP is that the series is clearly weakening, and this has been occurring quite steadily since the start of the year,” he wrote in a note to investors on Wednesday.
Some economists said Wednesday they weren’t changing their estimates for Thursday in the wake of the ADP news.
Pantheon Macroeconomics economists said they were anticipating private payrolls to see a net gain of 100,000 jobs, which would probably still be strong enough for the Federal Reserve to stay on pause later this month. Pantheon economists said the ADP number “defies credulity,” noting a loss of 52,000 jobs in health care and education, a sector that’s been adding 77,000 on average the past six months.
Still, there’s a potential for education and health care to have weaker growth in June. That sector’s job gains tend to be softer in the summer, and the slowdown may be worse this year “due to the low hiring-low firing labor market” and federal spending cuts, Bank of America economists noted this week.
ADP’s negative number did appear to move the rate cut needle a little bit for investors. The markets expectations for a July rate cut increased to 25% from just under 21% the day before, according to CME Group’s FedWatch Tool.
Typically, it takes a little time for economic shifts to be reflected in the numbers (with exceptions being major shocks, say, like a global pandemic).
But job growth is becoming anemic, Ron Hetrick, senior labor economist at Lightcast, told CNN in an interview.
And it wasn’t supposed to be that way. Economists, markets and businesses alike were pretty sure they’d have one, if not two, rate cuts from the Federal Reserve by now that would have helped juice the economy (something Fed Chair Jerome Powell said himself Tuesday).
“We were starting to see some excitement toward the end of last year,” Hetrick said, referencing hiring plans conveyed to him by IT staffing companies. “When the uncertainty entered in, when the tariff uncertainty entered in, the Fed got nervous about changing rates, and you just saw all of that retracted overnight. All of these discussions, all of these [hiring] plans, everybody just said, ‘Well, not right now.’”
“There’s a difference between true economic weakness — which is no one’s buying my stuff, and I’m going to go out of business — and a lack of hiring because of uncertainty,” Hetrick said. “I don’t believe we have a weak labor market because the economy is poor. I think we have a weak labor market because companies don’t feel good.”
But that weakness ultimately could feed on itself and make the labor market — and economy — more vulnerable to shocks, cautioned Elizabeth Renter, senior economist at NerdWallet.
“It will be months or even years before we see the full effects of tariffs, federal cuts and immigration policies in the labor market,” she told CNN in an email. “But if we continue to see increasing weakness, these things may have a more resounding impact, as the labor market won’t be robust enough to weather a storm.”
The headline numbers from the May jobs report indicated that the labor market was cooling, but not collapsing. Employers added an estimated 139,000 jobs, while the unemployment rate held steady at 4.2%.
However, the guts of the report indicated that cracks were continuing to spread. Nearly 91% of the month’s job gains came from health care and leisure and hospitality.
The labor participation rate fell, and the main reason the unemployment rate didn’t budge was because more workers left the labor force.
The unemployment rate is a critical indicator of economic health; however, in part due to seismic shifts around immigration, it’s losing its luster and instead turning into a math problem.
“Unemployment is still low, but we’ve got to watch how we get to that unemployment number,” Hetrick said. “If you’re doing it because your labor force is shrinking, you’re not doing it through strength. You’re doing it through a math equation.”
Foreign-born workers, irrespective of legal status, have accounted for about three-quarters of total labor force growth since February 2020, according to an analysis released in June from Wells Fargo economists. And recent efforts to curtail unauthorized immigration are contributing to a shrinking of the labor force, they noted.
“Whereas immigration overstated the pace of labor market cooling last year, it could now paint an overly rosy picture of its health,” they wrote. “We expect the unemployment rate to peak at just 4.5% in the year ahead as weaker demand for workers coincides with weaker supply. Although this would mark a less abrupt increase than the rise in the unemployment rate that helped spur the Fed to ease monetary policy last year, the uptick amid a slowing supply backdrop (and from a higher starting point) would make the increase more precarious.”
The labor market is in a state of low churn: Hiring activity is running near 10-year lows and workers aren’t feeling confident enough to quit; however, employers, for the most part, are holding on to the workers they have.
Layoff activity hasn’t accelerated recently, according to weekly jobless claims data, layoff announcement reports, Worker Adjustment and Retraining Notification Act postings, and the government’s Job Openings and Labor Turnover Survey report.
On Wednesday, Challenger, Gray & Christmas released its latest report that tracks layoff announcements. In June, US-based employers announced 47,999 job cuts, marking a 49% decline from May and a 2% drop from June of last year.
Layoff announcements tend to decrease in June — a month when some companies’ fiscal year ends — and July, Challenger historical data shows.
Year to date, layoff announcements are running at the hottest rate since the pandemic and, before that, the Great Recession, Challenger noted.
However, 288,628, or nearly 40%, of the 744,308 announced cuts made in the first half of 2025 came from mass layoffs conducted by the Department of Government Efficiency initiative launched by the Trump administration with Elon Musk at the helm.
Plans can change, and announcements (or reported cuts) might not result in job losses. For example, not all federal workers were laid off immediately, some have been rehired, and other actions are being challenged in court.
The BLS data shows that the federal government has shed jobs since February. Through May, the sector has lost a combined 56,000 jobs.
Still, the federal government accounts for a tiny share (1.8%) of overall employment, and the federal workforce has remained largely stable for much of the past 80 years: Most of the public sector job gains (schools, utilities, etc.) have occurred at the state and local level.
Tuesday’s JOLTS data showed that layoffs fell in May from 1.79 million to 1.6 million, staying below pre-pandemic levels. The rate of layoffs remains near record lows.
The most recent jobless claims data will be released Thursday morning at the same time as the jobs report. First-time claims have slowly moved higher; however, continuing claims are running near four-year highs, indicating that people are having a harder time finding work.
“The early impacts of tariffs are just one drag on the job market,” Daniel Zhao, economist for Glassdoor, wrote last month. “A bevy of other headwinds are accumulating including federal layoffs and funding cuts, slowing immigration and revocation of TPS work authorization, high interest rates, and more. While each alone would be too small to cause a recession, the combination of headwinds risks decelerating the job market just before the full weight of the tariff shock arrives.”
