The private sector lost 33,000 jobs in June, according to a Wednesday report by payroll provider ADP. This marks the lowest reading since March 2023. The government’s nonfarm payrolls report will be released Thursday morning, and economists expect a 110,000 increase for June, per Dow Jones estimates. But in light of ADP’s data, some economists may revise down their jobs reports estimates.

“The ADP report increased the odds of a downside surprise in Thursday’s nonfarm payroll release,” Jeffrey Roach, chief economist for LPL Financial, wrote in a note. “I expect a weaker-than-consensus report, increasing the odds the Fed cuts three times this year.”

The Federal Reserve’s decision not to cut interest rates yet this year due to market uncertainty and stronger-than-expected labor data has been a pain point for President Donald Trump. 

Trump has said the federal government is stuck paying massive interest-rate payments on its debt because the Fed hasn’t lowered rates, even calling for the equivalent of 10 rate cuts in June. The White House said on Monday that Trump sent a letter to Fed Chair Jerome Powell writing, “You have cost the U.S.A. a fortune—and continue to do so… You should lower the rate by a lot!”

Powell reiterated on Tuesday the central bank plans to “wait and learn more” about tariff effects on the economy before lowering rates again, Reuters reported. But weak labor data could incentivize the Fed to step in.

“Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month,” Nela Richardson, ADP’s chief economist, said in a press release published Wednesday morning.

The ADP report has diverged from official jobs reports in the past, signaling to some economists the measure can’t always predict the subsequent government jobs report. In May, ADP reported soft data that ended up differing significantly from the monthly jobs report figures that came later in the week.

“The drop in ADP’s measure of private payrolls tells us very little about the likely outturn for tomorrow’s official payrolls estimate for June, mostly because ADP’s forecasting track record is dire,” Pantheon Macroeconomics Senior U.S. Economist Oliver Allen said in a note. “ADP’s forecast error, regardless of sign, has averaged 87K—and has been as big as 348K—since its methodology was overhauled in August 2022.”

Allen added Pantheon maintains its forecast of a 100,000 increase in private payrolls in June, a “material step down” from the average 187,000 rise over the previous six months. He expects the Fed to wait until September to cut rates.

Private-sector slowdown

Though economists question the accuracy of ADP’s jobs report on a monthly basis, the data is “still helpful in determining long-term trends,” LPL Financial’s Jeffrey Roach said.

“This report isn’t entirely surprising,” LaborIQ Chief Economist Mallory Vachon told Fortune in an email. “First, the ADP payroll figures often differ from the Bureau of Labor Statistics report. And second, both tell a similar story about the current labor market trajectory–private-sector employment growth has slowed or declined.”

According to ADP’s report, the bulk of job losses came in service roles tied to professional and business services, as well as health and education. Small businesses led the losses, with large companies with more than 500 employees gaining the most.

This past month, the labor market has seen a slowdown in hiring, continuing a trend that’s been going on for the past year-and-a-half. Vachon said despite a slight uptick in layoffs over this time, “the lack of hiring volume has been a driver of unemployment increases.”

Bill Adams, chief economist for Comerica Bank, said in a note tariff hikes, the Israel-Iran conflict, and policy uncertainty gave employers reason to pull back on hiring during the second quarter.

“Hiring will likely stay slow in the second half of 2025,” Adams wrote. “Ordinarily, job growth malingering at the second quarter’s sluggish pace for half a year would translate into a meaningful increase in the unemployment rate, which would pressure the Fed to cut rates this fall.”

“This is why financial markets price in half a percent to three quarters of a percent in rate cuts by year-end,” he added.

Adams warned of the changing labor market—one where foreign-born workers accounted for four-fifths of labor force growth between early 2020 and early 2025. Trump’s crackdown on immigration “means that financial markets will likely be surprised by the unemployment rate holding steadier in the second half of the year than is currently priced in,” he wrote.

“This labor market has required constant reconciliation of data points that are seemingly at odds with one another,” Vachon said. 

Vachon said the most prominent example of this is wage growth, which hasn’t slowed as hiring cools.

“This puts pressure on businesses who face dueling challenges of slower economic growth and continued pressure to keep up with compensation,” she said.