MW What is the main takeaway from ADP data? The U.S. job market has cooled.

By Greg Robb

Average payroll gain over past three months is weakest in two years, leading Trump to push for lower interest rates

The main takeaway from the ADP job rdata released Wednesday is that the U.S. labor market has cooled in the second quarter, economists said.

"The job market has downshifted in the second quarter," said Bill Adams, chief economist for Comerica Bank, in a note to clients. "Tariff uncertainty and high interest rates weighed on job growth."

James Knightley, chief international economist at ING, said that the main message from the ADP report is that the business sector will remain "wary of putting money to work" until there is some clarity about trade tensions.

ADP reported private employers added a scant 37,000 jobs in May, down from 60,000 in April and the weakest in over two years. The consensus forecast was for 110,000 jobs, according to Econoday.

Economists said the ADP data was a negative signal for the upcoming U.S. jobs report for May. The consensus forecast for Friday's government report is for 125,000 jobs.

"We're not getting the warm fuzzies [about Friday's jobs report] given what has been seen so far," said Jennifer Lee, senior economist at BMO Capital Markets.

Neil Dutta, head of research at Renaissance Macro Research, noted that ADP private-payroll gains have averaged 81,000 a month over the past three months, the weakest level in two years.

Over the past three months. ADP has been running 50,000 below the government data on average.

President Trump noticed. After the ADP data, he fired off a social-media post calling for Federal Reserve Chairman Jerome Powell to cut interest rates.

Adams of Comerica said the Fed will take notice of the slower job growth, but it won't be enough to convince them to cut interest rates in the near term.

"Labor-force growth will also be slower in 2025 due to less immigration, so less job growth is needed to hold the unemployment rate steady," Adams said.

Economists are divided about how useful the ADP data is.

Oliver Allen, senior U.S. economist at Pantheon Macroeconomics, is a sharp critic. He said it has a very poor track record in recent years.

Just last month, he noted, ADP forecast that 62,000 jobs were added in April while the government data showed 167,000 jobs created.

ADP's forecast error has averaged 84,000 since August 2022, Allen added.

Nancy Vanden Houten, economist at Oxford Economics, said that over time the ADP and government statistics "tell the same story," but there can be big divergences month to month.

"I never change my forecast based on the ADP number," she said.

Vanden Houten noted that last month, ADP reported a 28,000 decline in health and education employment while the government statistics showed a gain of 70,000.

Adams noted that ADP's measure of job growth is different than the official report from the Labor Department.

"But since ADP has real-time payroll data for over 25 million private workers, it's a good preview of the official numbers," he said.

-Greg Robb

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June 04, 2025 13:06 ET (17:06 GMT)

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