The latest ADP National Employment Report for January indicates a significant moderation in private sector job creation, registering a gain of just 22,000 jobs—less than half of the expected 48,000 and a substantial decline from December's revised growth of 37,000 jobs. This marked slowdown has intensified scrutiny over the labor market's resilience amid broader economic uncertainties.
The delayed release of the official Bureau of Labor Statistics nonfarm payroll data, postponed due to a partial government shutdown, has elevated the prominence of the ADP report. Economists, however, caution that while informative, ADP data does not perfectly mirror the government's employment measures.
Sectoral Disparities Highlighted in January Hiring
Within the reported figures, certain industries delivered robust job additions, offsetting losses in others. Education and health services led the growth story by adding 74,000 positions, reaffirming their role as critical contributors to employment expansion. The financial sector also contributed 14,000 new jobs, while construction experienced a modest increase of 9,000 roles. Additionally, trade, transportation, and utilities expanded by approximately 4,000 jobs, matched by a similar rise in leisure and hospitality employment.
Conversely, other sectors faced contraction. Professional and business services experienced a considerable downturn, shedding 57,000 jobs. Manufacturing continued a prolonged decline with an 8,000-job loss marking its eleventh consecutive negative month. The information sector also contracted by 5,000 jobs, with other service industries decreasing by 13,000.
From a business size perspective, small employers reported flat hiring numbers, mid-sized firms saw positive net gains of 41,000 jobs, while large employers reduced their workforce by 18,000 jobs.
ADP's chief economist, Dr. Nela Richardson, noted a year-over-year slowdown as private employers added 398,000 jobs in 2025, falling substantially from the 771,000 jobs created in 2024, indicating a marked deceleration in private employment growth.
Wage Growth Persists Despite Cooling Hiring
Despite the reduced pace of employment increase, wage growth remained comparatively stable. Data from ADP indicated that annual pay increases for job-stayers held steady at 4.5%, maintaining a consistent range observed since the previous spring. Meanwhile, wages for individuals changing jobs slightly moderated from 6.6% growth down to 6.4%.
Richardson emphasized the unusual stability in wage trends amidst declining job creation rates over the last three years. Differentiating by firm size, smaller businesses—those with fewer than 20 employees—reported the lowest pay growth at 2.5%, contrasting with a 5.0% increase among large companies with over 500 employees.
Sectorally, financial activities led wage growth at 5.2%, closely followed by manufacturing at 5.0%. Construction and leisure/hospitality sectors also posted solid wage expansions of 4.7%.
Interpreting the Labor Market’s Health
Economist Peter Williams from 22V Research characterized the headline ADP employment figure as weak but pointed out the underlying trend, when smoothed over six months and adjusted for revisions, shows progress—from a moving average of 22,000 up to 58,000 monthly jobs, signaling improvement since the previous fall season.
Williams attributes much of the slowdown earlier in 2025 to uncertainties related to tariffs and a natural pullback in labor supply, though he notes recent hiring trends display modest recovery signs. He further comments that the concentration of new jobs in healthcare and leisure sectors, coupled with low worker turnover, minimal layoffs, and steady wages, suggests the economy remains balanced—not exhibiting overheating nor significant decline.
Considerations on ADP Report Reliability
While the ADP report samples over 26 million private sector employees, it does not emulate the Bureau of Labor Statistics’ methodology directly, resulting in limited short-term correlation. Nevertheless, in the absence of the official payroll release, it currently serves as a crucial proxy for gauging employment trends.
For market participants, the ADP data reinforce an emerging narrative of a cooling labor market: hiring activity is slowing but remains positive, and wage growth is steady rather than accelerating. These findings contribute to a cautiously watchful outlook on employment conditions as 2026 unfolds.