A weaker-than-expected private employment report in January is sparking debate over whether the labor market is showing signs of real stress - or simply noise in an already noisy economy.
The ADP National Employment Report on Wednesday revealed that U.S. private employers added just 22,000 jobs in January, well below the 48,000 expected and marking a notable slowdown from December's downwardly revised 37,000 gain.
With the Bureau of Labor Statistics postponing the official nonfarm payroll report due to the partial government shutdown, the ADP reading has taken on outsized importance this week - even as economists warn it's not a perfect substitute.
Hiring Slows, But Healthcare Booms
January's weak hiring figures were not broad-based. In fact, a handful of sectors showed strong gains.
The education and health services sector added 74,000 jobs, continuing its dominance as the most reliable source of labor market growth. Financial activities added 14,000 jobs, and construction rose by 9,000.
Trade, transportation and utilities added about 4,000 jobs, while leisure and hospitality also rose by roughly 4,000.
But those gains were offset by significant losses elsewhere. Professional and business services shed 57,000 jobs, and manufacturing lost 8,000, marking the 11th consecutive monthly decline for the sector.
The information sector also lost 5,000, while "other services" fell by 13,000.
Hiring was flat at small businesses, positive at mid-sized firms (+41,000), and negative among large employers, which shed 18,000 jobs.
"Job creation took a step back in 2025," said Dr. Nela Richardson, ADP's chief economist, noting that private employers added 398,000 jobs last year, down from 771,000 in 2024.
Pay Growth Steady Despite Soft Hiring
Wage growth remained stable despite slower job creation. ADP's pay insights showed annual pay for job-stayers rose 4.5%, holding firm in a range that's barely budged since last spring. Pay for job-changers moderated slightly from 6.6% to 6.4%.
"While we've seen a continuous and dramatic slowdown in job creation for the past three years, wage growth has remained stable," Richardson said.
Small firms with fewer than 20 employees posted the lowest wage growth at 2.5%, while large firms with over 500 employees saw 5.0% growth.
Among sectors, financial activities led wage gains at 5.2%, followed by manufacturing at 5.0%, and construction and leisure/hospitality at 4.7%.
Hiring Cools - Is the Labor Market In Trouble?
Peter Williams, economist at 22V Research, said while the headline ADP number was soft, the underlying trend looks more resilient, especially after benchmark revisions.
"The +22K print for January is obviously weak," Williams wrote in an emailed note, "but after revisions, the 6-month moving average shifted from 22K to 58K, showing improvement since fall."
He highlighted that tariff-related uncertainty, alongside a natural deceleration in labor supply, contributed to the spring 2025 slowdown - but trends since then have modestly improved.
Williams also indicated that hiring remains narrow and concentrated in healthcare and leisure, but that low churn, low firings, and steady wages point to an economy that is not overheating, but not collapsing either.
How Much Should You Trust ADP Employment Report?
Despite its large payroll sample - over 26 million private-sector workers - the ADP report is not designed to track the BLS methodology directly.
Economists consistently note limited short-term correlation between the two. Still, with the official payroll report delayed, ADP's data may be the best available signal for now.
For markets, the report reinforces a cooling labor-market narrative: hiring is slowing, but not crashing. Wage growth is stable, not accelerating.