The U.S. Labor market demonstrated continued weakness in January, adding a mere 22,000 private sector jobs, according to a report released today, , by payroll processing firm ADP. This figure falls significantly short of expectations and underscores a trend of sluggish hiring that began in the latter half of 2025.
The modest gain was heavily influenced by a substantial increase of 74,000 jobs in the education and health services sector. Without this surge, the overall job growth figure would have been negative. The January increase was a marked deceleration from the downwardly revised 37,000 jobs added in December. Market consensus, as reported by Dow Jones, had anticipated a gain of 45,000 positions.
This report arrives amidst concerns about the overall health of the U.S. Economy and adds to a narrative of a “low-hire, low-fire” environment. The data is likely to be closely scrutinized by Federal Reserve policymakers as they assess the need for further economic support. The sluggishness suggests limited inflationary pressure from wage growth, but also raises questions about the strength of underlying economic activity.
Sectoral Divergences
Beyond the robust performance of the health care sector, financial activities contributed 14,000 jobs to the increase, while construction added 9,000. The trade, transportation, and utilities industries, along with leisure and hospitality, each saw gains of 4,000 jobs. However, these positive contributions were offset by significant losses in other areas.
Professional and business services experienced a substantial decline, shedding 57,000 jobs. Other services lost 13,000 positions, and manufacturing saw a decrease of 8,000. The vast majority of net job gains – all but 1,000 – were concentrated within the services sector, highlighting a growing divergence in economic performance across different industries.
Company Size and Wage Growth
The job gains were not evenly distributed across companies of different sizes. Firms employing between 50 and 499 workers were responsible for all of the net job additions. Small businesses remained relatively flat, while larger employers, those with 500 or more employees, experienced a decline of 18,000 jobs. These figures are subject to rounding, and do not sum precisely.
Wage growth for those remaining in their positions remained relatively stable, increasing by 4.5% compared to December. This suggests that while hiring is slowing, employers are not aggressively cutting wages, potentially indicating a reluctance to risk losing existing talent.
Delayed Bureau of Labor Statistics Report
The ADP report typically serves as a precursor to the more comprehensive Bureau of Labor Statistics (BLS) nonfarm payrolls report, which is usually released on the first Friday of each month. However, the release of the BLS report has been delayed due to the ongoing partial government shutdown. The timing of the BLS release remains uncertain, pending a resolution to the political impasse. This delay further complicates the assessment of the current labor market conditions.
The January ADP report paints a picture of a labor market struggling to gain momentum. The combination of weak overall job growth, sectoral disparities, and the delayed BLS report creates a complex and uncertain outlook for the U.S. Economy. The health care sector remains a bright spot, but the declines in professional and business services, along with manufacturing, raise concerns about broader economic weakness. The impact of the government shutdown on the availability of key economic data adds another layer of complexity to the situation.
The continued sluggishness in hiring, coupled with the downward revisions to previous months’ data, suggests that the labor market may be facing more significant headwinds than previously anticipated. The Federal Reserve will likely factor this data into its upcoming policy decisions, as it seeks to balance the risks of inflation and economic slowdown. The coming weeks will be crucial in determining whether the January slowdown is a temporary blip or the beginning of a more prolonged period of economic weakness.
