The ADP employment data, known as the &#34;little non-farm&#34; report, saw a significant decline in February, marking the lowest growth since July and indicating a cooling labor market. Policy uncertainty and slowing consumer spending may be the main reasons.
On Wednesday, data released by ADP Research showed that the U.S. ADP employment number unexpectedly dropped to 77,000 in February, compared to an expected value of 140,000 and a previous value of 183,000.
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The slowdown in growth may be due to policy uncertainty and a slowdown in consumer spending, leading to layoffs or hiring slowdowns last month. The market expects that the non-farm data to be released on Friday will show a rebound in employment growth, including government positions, in February.
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It is worth noting that the data collection period for this report was earlier than the recent large-scale layoffs initiated by the Trump administration to reduce the size of the federal government. Therefore, this report may not fully reflect the latest employment situation.
ADP Chief Economist Nela Richardson stated:
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“Policy uncertainty and slowing consumer spending may have led to layoffs or hiring slowdowns. Our data, along with other recent indicators, suggest that employers are hesitant to hire as they assess the future economic environment.”
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<h2>February Sees Sharp Decline in New Employment, Service Sector Hit Hardest</h2>
The reduction in jobs is mainly concentrated in the service sector, with the most significant declines in trade, transportation, utilities, and the education and healthcare industries. In contrast, employment in goods-producing companies saw a significant increase.
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The ADP report also indicated that wage growth remained relatively unchanged. Workers who changed jobs saw a wage increase of 6.7%, while those who stayed in their positions experienced a wage growth of 4.7%.
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Optimism among small businesses is soaring, but small enterprises have the highest number of layoffs.
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The ADP data, along with the recent increase in unemployment claims, points to a cooling U.S. labor market. Layoffs at companies such as federal contractors have also exacerbated this trend. In the context of an uncertain economic outlook, businesses are less willing to hire, leading to more uncertainty in the labor market
A monthly survey by the University of Michigan shows that consumers are increasingly worried about rising unemployment rates in the coming year. The decline in consumer confidence may further suppress consumer spending, exacerbating the risk of economic slowdown.
The Federal Reserve is closely monitoring signs of deterioration in the labor market, trying to strike a balance between supporting the job market and controlling inflation. The slowdown in employment data undoubtedly adds complexity to the Federal Reserve's decision-making.
<h2>Market Reaction</h2>
After the data was released, U.S. Treasury yields fell slightly, with the 10-year Treasury yield down more than 1 basis point, currently at 4.240%.
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U.S. stock index futures showed little change.
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According to data released by ADP Research, the number of ADP jobs in the U.S. unexpectedly fell to 77,000 in February, compared to an expected value of 140,000 and a previous value of 183,000. The slowdown in growth may be due to policy uncertainty and a slowdown in consumer spending, leading to layoffs or a slowdown in hiring last month

- The ADP employment data for February showed a significant drop to 77,000 jobs, the lowest since July, indicating a cooling labor market due to policy uncertainty and slowing consumer spending.  
- Job losses were primarily in the service sector, particularly in trade, transportation, utilities, and education, while goods-producing companies saw job gains.  
- The report suggests that employers are hesitant to hire amid economic uncertainty, which may further suppress consumer spending and increase the risk of economic slowdown.

In February, the ADP employment figure in the United States unexpectedly fell to 77,000, below expectations, marking the smallest increase since July