Companies are avoiding layoffs but have exhausted all other cost-cutting measures: slowing hiring to near-zero, cutting hours, and reducing temp staff. This "firewall" against recession is the only thing holding up the labor market, but it leaves businesses with no other levers to pull if demand weakens further.

Recent reports of rising unemployment are skewed by significant cuts in government jobs, which fell by 162,000 in two months. Over the same period, the private sector added 121,000 jobs, indicating underlying economic strength obscured by the headline numbers and public sector downsizing.

An analysis of ADP payroll data shows job growth is concentrated entirely in large companies (over 250 employees), while smaller firms are consistently shedding jobs. This divergence is attributed to smaller businesses' inability to absorb tariff costs or reshuffle supply chains, unlike their larger, more resilient counterparts.

ADP data reveals a stark divergence in the labor market. In November, companies with fewer than 50 employees lost 120,000 jobs. This indicates smaller firms are struggling disproportionately with tariffs and labor issues, while larger firms continue to add to their payrolls.

The job growth diffusion index, measuring the share of industries expanding payrolls, fell to 47.6 in October. A reading below 50 has historically signaled a recession, indicating that current job gains are dangerously concentrated in just a few sectors like healthcare.

The current labor market is characterized by both low hiring and low firing rates. While this appears stable, it makes the economy fragile and more vulnerable to negative shocks. Unlike a high-churn environment, there is little buffer to absorb a sudden downturn, increasing the risk of a rapid deterioration.

The long-held belief that companies are "hoarding" labor due to post-pandemic hiring scars is becoming a weaker argument. As economic pessimism grows, the pressure to cut costs should eventually force layoffs, making the continued low layoff rate increasingly puzzling and harder to explain solely by this factor.

A disconnect exists between high layoff announcements and record-low UI claims. This may be because laid-off white-collar workers receive severance, delaying their UI eligibility, and struggling self-employed small business owners aren't eligible for unemployment insurance at all.

By averaging data from ADP and Reveglio Labs, two key private sector sources, economists forecast that official Bureau of Labor Statistics (BLS) job growth figures for October and November will likely be close to zero. This points to a significant slowdown and stagnation in the labor market.