Contradicting ADP Miss Vs Non-Farm Payroll Sends Shockwaves Through Labor Market Outlook
The ADP and Non-Farm Payroll reports are sending mixed messages...What should you believe?
Written by Rebel Capitalist AI | Supervision and Topic Selection by George Gammon | July 3, 2025
The jobs data we got today wasn't just bad…it was historic. According to the latest ADP Employment Report, private sector employment dropped by 33,000 jobs in June, a staggering miss against expectations of 100,000 jobs added.
For context, this five-sigma miss is one of the worst on record, going back to the chaos of the "cervesa sickness" in 2020.
But it wasn’t just the headline number that shocked markets. It was the makeup of the job losses, the sectors affected, and what it all means for Fed policy and economic growth moving forward.
A Breakdown of the Carnage
The most critical takeaway is the plunge in service sector employment, which fell by 66,000 jobs. That’s huge.
The last four years have seen services drive almost all job gains. And now, not only is the sector no longer a source of growth, it’s actively contracting.
More granularly:
Small businesses bore the brunt, as usual, with steep job losses.
Midsize businesses better but not immune.
Large corporations showed slight gain.
We also saw job losses concentrated in professional services and finance…sectors typically insulated from cyclical weakness. That suggests deeper problems under the surface.
And one more ominous sign: Microsoft announced layoffs of 9,000 employees yesterday.
That’s not trimming fat…that’s a warning flare from a tech titan.
And if the sectors that once led the recovery are now leading the decline, what does that say about where we’re headed next? Especially when even the tech giants are blinking...
The AI Factor
Anecdotally, many business owners are using the softening economy as cover to accelerate automation and AI-driven layoffs.
Multiple CEOs across marketing, logistics, and admin-heavy sectors are telling employees to exit voluntarily…and just not rehiring.
The pressure on labor isn't just cyclical. It’s structural.
If AI adoption is driving a more permanent drop in demand for human workers, expect more carnage ahead.
But here’s the twist few are pricing in: what if this downturn isn’t cyclical at all…but the beginning of a structural realignment that permanently reshapes the labor force?
The Fed, Still Focused on Inflation?
Jerome Powell and company continue to claim inflation is the top risk. But this report challenges that stance.
How can runaway inflation be the main concern when the economy is losing private sector jobs at this pace?
Even May’s ADP number was revised downward to a meager 29,000.
And let’s not forget the household survey showed negative 700,000 jobs recently, masked only by a plunge in labor force participation.
In other words, we could be right at the doorstep of recession…if not already there.
If the Fed’s still watching lagging inflation data while the labor market craters in real time, the next policy move will likely arrive too late…and hit all the wrong targets.
But what are markets saying?
Market Reactions: Yields, the Dollar, and the Fed
Immediately after the ADP data dropped, markets responded with falling expectations for further Fed tightening.
The DXY dollar index fell sharply.
The yield curve steepened: 10-year yields rose 6 basis points, but 2-year yields barely moved.
Rate cut probabilities for the July FOMC meeting surged.
This reinforces the Rebel Capitalist "Dollar Playbook" thesis: narrowing interest rate differentials between the Fed and other central banks will push the dollar lower and steepen the curve.
In a world where rate cut odds shift by the hour, price signals are flashing warnings.
But the biggest tell may come from the divergence no one can explain…yet...Today’s Non-Farm Payroll…
Today’s Non Farm Payroll
The Non-Farm Payroll (NFP) report for June 2025, released today, July 3, 2025, by the U.S. Bureau of Labor Statistics, showed a solid job gain of 147,000, exceeding expectations of 110,000, with notable growth in state government (+73,000) and healthcare (+51,000) sectors, while the unemployment rate sits at 4.1%.
This contradiction is significant because the ADP report, often viewed as a precursor to the NFP, can mislead investors and traders, causing market volatility in assets like the U.S. dollar and gold.
The NFP-ADP discrepancy also highlights that while government hiring propped up overall employment, private-sector declines (per ADP) suggest big underlying economic challenges.
This divergence complicates market expectations and policy decisions, as the robust NFP headline may mask private-sector fragility, potentially delaying needed interventions to boost business activity.
Long-term reliance on government job growth over private-sector expansion is unsustainable, as it risks fiscal imbalances and reduced economic dynamism.
So what happens when the government prints a "strong" jobs number…while private payrolls are quietly bleeding out? The investment greats might see this as the perfect misdirection…and act accordingly.
What Would the Investment Legends Do?
Stanley Druckenmiller might view this as the moment to go long bonds and short the dollar, anticipating not just cuts but a full policy reversal.
Paul Tudor Jones could interpret the data as setting up a trade in gold or Bitcoin, as investors anticipate a return to easy money to support growth.
Jim Rogers, forever the contrarian, might look to short U.S. equities and go long emerging markets, seeing America’s labor weakness as a signal the baton is passing elsewhere.
And if the smartest money in the world is likely preparing for a reversal in Fed policy, a weaker dollar, and AI-induced job shocks...why is Wall Street still treating this like a soft patch?
Final Thoughts
ADP wasn’t just reporting a soft number. It was a system shock. And state Governments adding more jobs to their payrolls while the private sector bleeds out proves how fragile the real economy truly is.
As markets rejoice by pushing markets higher and media headlines report the ADP data as "soft," Rebel Capitalists know better.
When the job losses hit the service sector and are driven by large employers and AI disruption, that’s not a blip…it’s a canary in the coal mine.
As always, stay alert, stay skeptical, and stand up for freedom, liberty, and free markets.
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Job losses directly related to AI are finally accelerating. This was foretold 20 years ago. Governments were seen as not being ready when the time came and with a predicted global population of 8B it compounded the problem. There was no way to predict what new jobs would be created of course but in the near term it was to be very disruptive as the workforces around the world adjust.