Surprise losses raises pressure on the Fed to ease again
Private employers cut 32,000 jobs in November, the steepest drop since early 2023 and a sharp miss against forecasts for solid gains, according to payroll processor ADP.
The weakness, concentrated among small businesses, arrived days before the Federal Reserve’s final policy meeting of the year and pushed futures markets to price in a higher chance of another quarter‑point cut.
Small businesses signal mounting stress
ADP data showed companies with fewer than 50 workers shed 120,000 jobs in November, including a 74,000 drop among firms with 20 to 49 employees, the largest one‑month decline since May 2020.
Small‑business cuts more than offset a 90,000 gain at larger employers, leaving total private payrolls lower.
“Hiring has been choppy of late as employers weather cautious consumers and an uncertain macroeconomic environment,” Nela Richardson, ADP’s chief economist, said.
“And while November’s slowdown was broad-based, it was led by a pullback among small businesses.”
Losses were heaviest in professional and business services, which fell by 26,000 jobs, while information, manufacturing, financial activities and construction also cut headcount.
Education and health services added 33,000 positions and leisure and hospitality 13,000, but not enough to offset broader weakness. Wage growth for job‑stayers slowed to 4.4% year over year, while job‑switchers saw 6.3%, the lowest since early 2021.
Markets price in another Fed move
With the official nonfarm payrolls report delayed until Dec. 16 by the government shutdown, ADP’s figures and the Fed’s Beige Book – which reported that employment “declined slightly” in many districts – carried unusual weight.
“The modest fall in the ADP payrolls measure in November, coming on the back of a similar message from the Fed’s Beige Book, should be enough to persuade the FOMC to vote for another cut next week,” Stephen Brown, deputy chief North America economist at Capital Economics, wrote.
He said the data would offer “further ammunition to the more dovish FOMC participants who still favor a final cut this year.”
Odds of a December cut reached roughly 89% after the report, according to CME FedWatch.
Gary Cohn, vice chairman at IBM, says the Fed’s December decision could hinge on one or two votes as it weighs inflation control against rising unemployment. His analysis underscores the complexity of the dual mandate and its impact on markets.https://t.co/zgFkcQZIzA
— Mortgage Professional America Magazine (@MPAMagazineUS) December 2, 2025
What it could mean for mortgage lenders
For mortgage lenders and originators, a weaker labor market tends to point toward lower Treasury yields and, ultimately, lower funding costs.
But past rate‑cut cycles showed that mortgage rates did not always fall in lockstep with the Fed’s moves, reflecting a wider mix of forces including inflation expectations and bond‑market pricing.
One recent analysis noted that mortgage costs often moved independently of the Fed’s decisions and sometimes in the opposite direction.
In earlier rate cuts this year, lenders warned that spread volatility, secondary‑market liquidity and tight housing inventory all matter as much as the Fed’s benchmark when it came to actual borrower pricing.
Many executives also stressed that persistent affordability challenges and credit‑quality concerns could temper any demand bounce from marginally lower rates.
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