Private sector hiring in the United States slowed markedly in January, according to data released by Automatic Data Processing (ADP) on Wednesday, with payroll growth falling well short of expectations.
Private payrolls increased by just 22,000 during the month, well below market expectations of 48,000. The report suggested that hiring momentum remained fragile, with gains narrowly concentrated in a handful of industries while several key sectors continued to contract.
Healthcare stood out as the main source of job creation, adding 74,000 positions in what ADP described as an otherwise lacklustre month.
The sector has been a consistent driver of employment growth, helping to offset broader softness across goods-producing and business-facing industries.
By contrast, manufacturing extended its prolonged downturn, losing 8,000 jobs. The sector has now recorded job losses every month since March 2024, reflecting ongoing pressure from weaker demand and cost challenges.
Professional and business services also saw significant declines, shedding 57,000 positions, while the other services category lost 13,000 roles.
Dr. Nela Richardson, Chief Economist at ADP, said: "Job creation took a step back in 2025, with private employers adding 398,000 jobs, down from 771,000 in 2024. While we've seen a continuous and dramatic slowdown in job creation for the past three years, wage growth has remained stable."
Outside healthcare, employment gains were modest. Financial activities added 14,000 positions, and construction rose by 9,000.
Trade, transportation and utilities, along with leisure and hospitality, each contributed 4,000 jobs. Overall, nearly all net job growth came from the services sector.
Company size data pointed to uneven hiring patterns. Mid-sized firms employing between 50 and 499 workers accounted for all net job gains.
Small businesses were flat on the month, while large employers cut 18,000 positions.
Wage growth showed little change from December levels. Workers who remained in their roles saw pay increase by 4.5%, suggesting that while hiring has slowed, compensation pressures have not eased significantly.
The December payroll figure was also revised lower, with the number of jobs added adjusted from 41,000 to 37,000, reinforcing the view that labour market momentum has been softening for several months.
The report indicates that the labour market has entered 2026 on a similar footing to late 2025, characterised by subdued hiring and limited layoffs.
This low-hire, low-fire environment is unlikely to alleviate concerns among Federal Reserve policymakers that further policy support may be needed if growth continues to cool.
The ADP data typically serves as a precursor to the more closely watched U.S. nonfarm payrolls report from the Bureau of Labor Statistics. However, the release of the government report has been delayed following a partial government shutdown that recently concluded, leaving investors with fewer official data points to assess labour market conditions in the near term.
