According to the ever-reliable Merriam-Webster, hyperbole is a literary and rhetorical device defined as extravagant exaggeration. In Hollywood, hyperbole is often born of improvisation. Take 1991’s Point Break starring Patrick Swayze and Keanu Reeves. As good as some of the lines were, it was co-star Gary Busey who’s credited with one of the movie’s most quotable quotes: “Utah! Get me two!” Juan Hernandez from theinertia.com took umbrage with the line, ranting: “Don’t agree ‘Utah! Get me two’ is possibly the most overrated movie quote ever? It wasn’t even in the script. And yes, there’s beauty in improvised moments, but this one should really just be chalked up to the fact that anything born of Gary Busey’s stream of consciousness always has entertainment value. The man is a walking non-sequitur, which is what makes Gary Busey Gary Busey, but that alone shouldn’t make an offhanded request for [meatball] sandwiches the film’s most memorable moment.”
Over the years, the ADP employment report’s reputation as a reliable predictor of nonfarm payrolls (NFP) has withstood its fair share of overrated criticism. It doesn’t matter that ADP’s payroll data covers more than 500,000 companies and is more than four times greater than the Bureau of Labor Statistics’ establishment survey sample size. It’s missed the bullseye too many times. Nevertheless, ADP still holds some sway. Going into Wednesday’s trading session, consensus and whisper estimates for NFP were 110,000 and 100,000, respectively. By the end of the day, the consensus was lowered to 106,000 and the whisper reduced to 97,000. For those economists who adjusted their NFP calls, their median projection of 98,000 was on par with the whisper.
ADP’s surprising 33,000 decline in June, punctuated by May’s downward revision, was enough to generate an intraday rally in the belly and short end of the Treasury curve. But it didn’t manage to close yields lower on Wednesday. Details of the report showed weakness centered in small (-47,000) and medium-sized firms (-15,000), while large corporations added jobs (30,000). By industry, compression in the labor-intensive service sector led the way, with declines in professional and business services (-56,000), education and health services (-52,000) and financial activities (-14,000). Offsets were notable on the goods-producing side.
ADP’s perspective of job growth by company size frames a case for NFP overstatement. The BLS birth/death model is meant to capture business openings and closures but has been notoriously late in signaling cyclical inflection points. Isolating firms with fewer funding levers reveals a notable downshift in job growth for small and medium-sized firms. The smallest operators are the weakest, registering back-to-back declines in May (-13,000) and June. These declines helped pull down the rolling 12-month trend to a cycle low 21,000 (blue line); mid-sized proprietors have been more stable, at 45,000 (yellow line). The divergence is stark when the 99,000 12-month average for the birth/death model is incorporated (red line).
ADP’s Chief Economist Nela Richardson noted that “a hesitancy to hire and a reluctance to replace departing workers led to job losses last month.” Challenger, Gray & Christmas picked up a similar disinclination to hire in June. At 3,191, hiring announcements limped at about one tenth their long-run average. Since the series 2004 inception, it was the second lowest on record behind December 2023’s print of 3,022. Because the data are not seasonally adjusted, a look back to the same month over time yielded an even more powerful message: it was the lowest June on record. More importantly, it stood under the 4,556 posted in June 2008 in the heat of the Great Recession (orange bars).
During Trade War 1.0, Challenger hiring plans clocked in at 13,504 in June 2018 and subsequently eased to 11,946 in the same month in 2019. The current episode clearly commands greater caution. Other comparisons to this time are warranted. The ISM (Institute for Supply Management) manufacturing Export index shares the common denominator of challenged global trade. While Trade War 2.0 is similarly weak vis-à-vis its predecessor (lilac line), the global picture has been under duress for appreciably longer on a relative basis. S&P Global PMI manufacturing Export Orders have been in contraction in 38 out of the last 42 months. During the 2018-19 chapter, this index only saw 16 months of contraction.
With stronger global trade headwinds this time around, the latest read on private hires via JOLTS (Job Opening and Labor Turnover Survey and indexed to 2019), not surprisingly, is running at a level below that reported back then (purple line). Not depicted, small business hiring plans from the National Federation of Independent Business have lost traction over 2025’s first half, stand near a cycle low, and are well below 2018-19 readings. Adding in the ISM Services Employment index to gauge spillover risk, a look back showed no dips under the breakeven 50-line in Trade War 1.0, but multiple visits during 2.0 (light blue line). A relapse today for the June figure, after May’s printed at 50.7, cannot be ruled out.
Continuing claims, indexed to 2019 like the hires data, are running well above the 2018-19 interval (green line). Critically, they’ve increased more rapidly in May and June after a stabilizing earlier this year. With insured unemployment on the rise and multiple alarms sounding the same warning for hiring, it’s no stretch to suggest the downside risk ADP captured could show up in today’s NFP. Even Gary Busey’s appetite doesn’t get in the way of that.