ADP Reports Surprise 42K Job Gain, But Small Business Losses Flag Labor Market Strain

Private Payrolls Surprise to the Upside — But It’s a Big-Business Story

Private hiring bounced back in October, offering a glimmer of resilience in a labor market that’s been flashing warning signs. ADP’s report showed a gain of 42,000 jobs — almost double what traders were braced for — and a sharp reversal from September’s downwardly revised 29,000-job drop. With the official BLS print off the calendar due to the government shutdown, this ADP release is carrying more weight than usual.

Big Firms Do the Heavy Lifting

The entire gain came from large companies. Firms with 250 or more employees added 76,000 jobs, while small and mid-sized businesses combined shed 34,000. That divergence isn’t new — but it’s becoming more pronounced. It suggests big firms still have balance sheet room to hire selectively, while smaller employers continue tightening belts in the face of higher borrowing costs and weaker demand.

Sector Breakdown: Mixed Bag Beneath the Headline

The strongest hiring came in trade, transportation, and utilities (+47,000), with education and health services also contributing (+26,000). But the picture was far from universally strong. Tech-heavy information services cut 17,000 positions — despite all the hype around AI. Professional and business services (-15,000) and manufacturing (-3,000) also pulled back. The factory sector remains a drag, even with tariff support still in play.

Wages Steady, But Growth Is Flatlining

Pay growth is holding but not accelerating. Job stayers saw a 4.5% year-over-year increase in October, unchanged from September. Job switchers did slightly better at 6.7%, up a tick. Still, wage gains appear to be losing momentum, a sign the labor market isn’t nearly as tight as it was in 2022. That lines up with ADP’s comment that “shifts in supply and demand are balanced.”

With BLS Offline, This One Matters

Traders usually discount the ADP print — but not this time. With the BLS shuttered, markets have to lean on what’s available. Before the shutdown, expectations were for a decline of 60,000 jobs in the official report and a rise in unemployment to 4.5%. That kind of signal would’ve supported more aggressive Fed easing. Now, with a modest private-sector beat in hand, the case for immediate rate cuts looks a bit softer.

Bottom Line: Cautious Optimism — But Don’t Chase It

October’s ADP print calms some nerves, but this isn’t a strong labor rebound. Big firms are still hiring, but the broader trend points to a cooling market — especially under the surface. With wage growth stalling and smaller businesses in retreat, the Fed may stay on hold, but it’s not a green light for risk-on trades. The bias remains cautiously bearish for labor-sensitive assets until more data proves otherwise.

More Information in our Economic Calendar.