"Little Non-Farm" warns again! In October, ADP private sector employment decreased by 45,000, marking the largest decline in two and a half years

The recent large-scale layoff plans announced by several well-known companies have raised market concerns about the accelerated deterioration of the labor market, and today's latest release of the "small non-farm" ADP weekly employment report confirms this fear.

On Tuesday local time, preliminary estimates from ADP Research Institute and the Stanford Digital Economy Lab showed that, in the four weeks ending October 25, the number of payroll jobs in U.S. private enterprises decreased by an average of 11,250 per week. Cumulatively, 45,000 jobs were lost that month (excluding government employees), marking the largest monthly decline in employment numbers since March 2023.

In line with this, several companies have recently announced layoff plans. A report from outplacement service firm Challenger, Gray & Christmas Inc. indicates that the scale of layoffs announced by companies this month has reached the highest level for the same period in over twenty years, raising concerns about the health of the labor market.

Continuous Layoffs Intensify Employment Market Deterioration

ADP began releasing more frequent labor market data last month as a supplement to its long-term monthly reports. This data is based on a four-week moving average and is released with a two-week lag.

The continuous increase in layoffs is particularly concerning given the current low hiring rates and the higher difficulty for unemployed individuals to find jobs. Goldman Sachs pointed out that although the technology sector saw significant increases in layoffs in two indicators in October, there is currently no clear evidence that most layoffs are directly driven by artificial intelligence.

Meanwhile, the number of initial unemployment claims—this less volatile and more representative indicator (but may lag behind layoff announcements and WARN Act notifications)—remains low.

Goldman Sachs has developed a new tool to monitor layoff discussions by tracking the transcripts of earnings calls from publicly traded companies. This tool shows that discussions focused on layoffs have recently increased, especially in the ongoing Q3 2025 earnings calls. The research found that after companies discuss artificial intelligence multiple times, discussions related to layoffs tend to increase, although this pattern has just begun to emerge in non-tech companies.

Goldman Sachs has integrated Challenger layoff announcements, WARN notifications, initial unemployment claims, and mentions in earnings calls into a layoff tracking indicator. This indicator rose in October and is currently above pre-pandemic levels.

Based on the level of the layoff tracking indicator, the level of the employment growth tracking indicator with net flat growth rate, and the quantile regression analysis of changes in labor slackness indicators, the risk of labor market deterioration has recently increased, with a 20-25% probability of the unemployment rate rising by 0.5 percentage points or more in the next six months (compared to 10% six months ago) In addition, due to deteriorating profit conditions and a decline in economic optimism, the U.S. small business confidence index fell to a six-month low in October. Data released by the National Federation of Independent Business on Tuesday showed that the optimism index decreased by 0.6 points to 98.2, with 5 of the 10 components declining and 4 improving.

The net percentage of business owners reporting profit growth over the past three months fell by 9 percentage points, marking the largest decline since the pandemic, primarily constrained by weak sales and rising material costs