In June, the US "small non-farm" unexpectedly cooled, with an increase of only 98,000, but layoffs plummeted, and wage increases supported the Fed's confidence in raising interest rates! The market is closely watching tomorrow's non-farm data.

On Wednesday, the latest data released showed that the U.S. ADP employment data for June, known as the "small non-farm", was below expectations. However, when combined with the sharp decrease in layoffs and accelerated wage growth, the U.S. labor market still demonstrates strong resilience. According to the ADP National Employment Report, private sector employment in the U.S. increased by 98,000 in June. This growth was lower than the expected 120,000 by economists and slower than the 122,000 increase in May. Nevertheless, the ADP data still indicates that private hiring remains steady and has just passed its strongest three months of hiring momentum in over a year. The report, jointly released by ADP and the Stanford Digital Economy Lab, also revealed wage changes: the annual wage growth for job switchers increased to 6.6%, accelerating from the previous period; while the wage increase for staying employees remained relatively stable at 4.4%. In terms of industry distribution, nearly half of the new jobs in June - about 48,000 - came from the education and health services industry, which has always been a stable engine of employment growth. The service industry added a total of 96,000 positions, with only 2,000 coming from non-service industries. Other industries that saw employment growth include trade, transportation, and utilities (+15,000), financial activities (+14,000), and other services (+8,000). The natural resources and mining industry reduced 5,000 positions, becoming the only industry to record negative growth. The leisure and hospitality industry only added 2,000 positions, continuing its trend of weak growth this year as an indicator of consumer demand. In terms of business size, employment growth leaned more towards small businesses. Institutions with fewer than 50 employees added 53,000 positions, large enterprises with over 500 employees added 25,000, and medium-sized enterprises added 29,000. Sharp decrease in layoffs, labor market structure remains stable In contrast to the slowdown in ADP employment growth, there is very low willingness among businesses to lay off employees. Data released on the same day by global outplacement firm Challenger, Gray & Christmas showed that the number of planned job cuts by U.S. employers in June significantly dropped by 53% to 45,849 people month-on-month, with the total number of layoffs in the first half of the year falling by 40% compared to the same period in 2025. Andy Challenger, a director at Challenger, attributed this trend to the cooling of layoffs in June, which is consistent with seasonal patterns from previous years. However, the layoffs are still concentrated in the technology industry, where artificial intelligence (AI) is continually reshaping job positions in companies. Despite the decrease in layoffs, the "temperature" of the job market is a mix of cold and warm. Data shows that the recruitment plans announced by companies in June decreased by 44% month-on-month. ADP's chief economist, Nela Richardson, said, "The current recruitment pace reflects signals from both the supply and demand sides. We understand that the job search is taking longer, but in certain industries, there are signs of limited labor supply. Overall, the result of these factors is that employment growth is slowing." This phenomenon is also reflected in a survey by the Conference Board, which found that the percentage of consumers finding job opportunities "difficult" increased to the highest level in nearly five and a half years in June. Market awaits official non-farm data ADP data have always been seen as a prelude to the non-farm employment report. The U.S. Department of Labor will release a more comprehensive non-farm employment report for June on Thursday. Currently, the market generally expects an overall increase of 115,000 jobs, lower than the 172,000 increase in May. The surge in government hiring seen in May is not expected to be replicated in June. If the expectations are met, this will be the strongest half-year recruitment performance in the U.S. since mid-2024. The market estimates that the unemployment rate will remain unchanged at 4.3%, with average hourly earnings expected to increase by 0.3% compared to the previous month and 3.5% year-on-year. With a strong labor market and a rebound in wage growth, the market may strengthen its expectations for the Federal Reserve to continue raising interest rates this year to curb inflation. Furthermore, with the recent temporary agreement between the U.S. and Iran to end their conflict, easing geopolitical tensions in the Middle East, falling energy prices, and improving consumer confidence could provide an additional boost to the job market. However, given the frequent disparities between ADP data and official non-farm data, the final employment situation still awaits validation from official data.