Private employers cut 32K jobs last month – hiking odds of interest rate cut as Commerce Secretary Howard Lutnick goes on defensive

Odds of an interest-rate cut at the Fed’s meeting next week jumped in the wake of disappointing November private payroll figures, with Commerce Secretary Howard Lutnick arguing President Trump’s tariffs were not to blame for the numbers.

US private payrolls lost 32,000 jobs last month – a sharp downward turn mostly accounted for by small businesses, according to the ADP National Employment Report released Wednesday. In contrast, October saw an upwardly revised increase of 47,000 jobs.

The November figure largely missed estimates across the board, as economists polled by FactSet expected a rise of 40,000, while those surveyed by Reuters and Bloomberg predicted gains of 10,000 and 5,000, respectively.

The odds of a quarter-point cut at the Fed’s Dec. 10 meeting jumped to nearly 89% following the weak report – up from 88% the previous day and 67% one month ago, according to CME FedWatch.

Lutnick argued the recent, record-breaking government shutdown and mass deportations suppressed job growth in November – not Trump’s trade policy.

“No, no, it’s not tariffs,” the commerce secretary said Wednesday on CNBC’s “Squawk on the Street.” 

“Remember, you had the Democratic shutdown, right?” he continued. “And then, remember, as you deport people, that’s going to suppress private job numbers of small businesses.”

Lutnick asserted that private payrolls will “rebalance and they’ll regrow,” since “this is just a near-term event.”

“Next year, the numbers are going to be fantastic,” he said,

The ADP report – jointly released with Stanford Digital Economy Lab using more than 26 million US employees’ payroll data – typically diverges from official government numbers.

But the private payrolls data carries more weight than usual because it’s one of the few glimpses into the state of the labor market that the Fed will get before its Dec. 10 meeting, after the government shutdown delayed crucial economic reports.

“This morning’s ADP data confirm what a lot of the doves are saying – it’s more important to focus on a weakening labor market than to worry about inflation,” Chris Zaccarelli, chief investment officer for Northlight Asset Management, said in a note Wednesday. 

According to the most recently available federal data, inflation remains stubbornly high, ticking up to 3% in September.

While employers added a surprisingly strong 119,000 jobs in the same month, the unemployment rate jumped to 4.4% – its highest level since October 2021, according to the Bureau of Labor Statistics. 

“Hiring has been choppy of late as employers weather cautious consumers and an uncertain macroeconomic environment,” ADP chief economist Nela Richardson said in a Wednesday statement. 

“And while November’s slowdown was broad-based, it was led by a pullback among small businesses.”

Businesses with fewer than 50 employees suffered the worst losses – shedding more than 120,000 jobs in November as medium and large companies added workers, according to the ADP report. 

That represents the most job cuts for small businesses since May 2020, according to Jeffrey Roach, chief economist for LPL Financial. 

It’s especially unusual heading into the all-important holiday shopping season, when small businesses tend to hold onto staffers.

The job growth among larger companies varied by industry, with professional and business services down 26,000; information-related companies down 20,000; manufacturing down 18,000; and financial activities and construction each down 9,000.

Consumer-facing industries seemed to perform better. Education and health services saw a gain of 33,000; leisure and hospitality increased 13,000; and trade, transportation and utilities added 1,000. Natural resources and mining also added 8,000. 

The annual pace of wage growth slowed in November to 4.4% for employees who stayed in the same position, down from October’s 4.5% rate, according to the ADP report.

Those who changed jobs saw wages jump 6.3% in November compared to the previous year, also down from October’s 6.7% pace. 

Economic reports have continued to yield mixed results, with major American companies like McDonald’s and Walmart seeing a big divide in spending habits between rich and poor.

While households earning more than $100,000 annually have continued to spend big, low-income consumers are cutting back on non-necessities, according to company executives.

The Bureau of Labor Statistics is expected to release its November jobs data on Dec. 16. It was originally slated for release this Friday.

Nonfarm payrolls data for October will be lumped into the November report. 

October’s unemployment rate, however, will never come out after the government shutdown prevented the collection of necessary data.