The latest snapshot of the US labor market sent mixed signals in June: private hiring slowed more than expected, but companies also pulled back sharply on planned layoffs. The data, released Wednesday by payroll processor ADP and outplacement firm Challenger, Gray and Christmas, leaves investors waiting for Thursday's more comprehensive jobs report from the Bureau of Labor Statistics (BLS).
ADP: Hiring Loses Steam
ADP reported that private employers added 98,000 jobs in June, down from 122,000 in May and below the 110,000 that economists surveyed by Reuters had expected. The ADP report, while often seen as a rough guide rather than a precise predictor of the BLS numbers, is still closely watched for early signals on labor market momentum.
The slowdown was broad-based, with small, medium, and large businesses all showing softer hiring. The services sector, which had been a steady engine of job growth, added fewer positions than in recent months. Manufacturing continued to shed jobs, a trend that has persisted as the sector grapples with higher interest rates and shifting demand.
Layoffs Drop Sharply
On the other side of the ledger, planned layoffs fell dramatically. Challenger, Gray and Christmas reported that US employers announced just 45,849 job cuts in June, a 53% drop from May. For the first half of 2024, planned cuts were 40% lower than in the same period last year.
Still, the tech sector remains a hotspot for layoffs, often tied to companies restructuring around artificial intelligence. As we reported in AI Overtakes Demand as Top Reason for June Layoffs, Challenger Reports, AI is now the leading reason cited for job cuts, surpassing traditional factors like slowing demand. This trend is not limited to tech; AI-Driven Layoffs Spread Across Banking, Tech, and Industry as Firms Reshape Workforces shows how the technology is reshaping hiring plans across multiple sectors.
The Broader Picture: Less Churn, Fewer Opportunities
The combination of slower hiring and fewer layoffs points to a labor market with less churn. Fewer new roles are being created, and fewer replacement positions open up when workers quit. That dynamic helps explain why the government's Job Openings and Labor Turnover Survey (JOLTS) showed just 1.04 job openings per unemployed person in May, down from a peak of over 2 openings per job seeker in 2022.
Consumer sentiment data from the Conference Board in June also showed that the share of respondents saying jobs are "hard to get" rose to its highest level in nearly five and a half years. That aligns with the cooling hiring trend and suggests workers are feeling less confident about their ability to find a new role quickly.
Earlier this week, the BLS reported that US Job Openings Edge Up but Hiring Slips, Keeping Fed on Hold, reinforcing the narrative of a labor market that is gradually softening rather than collapsing. The Federal Reserve has been watching these data closely as it decides when to begin cutting interest rates.
What It Means for Investors
For everyday investors, the labor market is a key driver of both corporate earnings and consumer spending. When hiring slows without a surge in layoffs, unemployment can stay low while opportunities quietly thin out. That can weigh on wage growth, because the fastest pay bumps often come from switching employers. If fewer companies are adding roles, workers have less leverage to demand raises, which can keep a lid on inflation—something the Fed wants to see.
But a labor market that is merely cooling, not freezing, is generally seen as a positive for stocks. It reduces the risk of the Fed keeping rates high for too long, while avoiding the sharp downturn that would hurt corporate profits. The key question for Thursday's BLS report is whether the official numbers confirm the ADP signal of slower hiring or surprise to the upside.
Investors should also watch for sector-specific trends. Tech and AI-related restructuring may continue to generate headlines, as seen in Microsoft Reportedly Plans Layoffs Under 2.5% as AI Spending Continues. But if layoffs remain concentrated in a few industries while the broader economy holds up, the overall impact on markets may be limited.
Thursday's BLS report will provide the cleanest read yet on where the labor market stands. Until then, the ADP and Challenger data offer a useful—if incomplete—glimpse of a job market that is losing steam but not falling apart.
