The U.S. private sector unexpectedly shed 33,000 jobs in June 2025, marking the first monthly decline in employment since 2010 outside of pandemic-related disruptions. This surprising contraction, reported by payroll processing firm ADP (NASDAQ:ADP), challenges the prevailing narrative of a robust labor market and raises questions about the economy’s underlying strength.
Economists had anticipated a gain of around 100,000 jobs for the month, making the 33,000-job loss a significant miss. Moreover, May’s job growth was revised downward from an initially reported 37,000 to just 29,000, further underscoring the softening momentum in private sector hiring.
The job losses were heavily concentrated in the services sector, which lost a total of 66,000 positions. Within this sector, professional and business services saw the steepest decline, with 56,000 jobs cut. Education and health services followed closely, shedding 52,000 jobs. Financial activities also contributed to the downturn with a loss of 14,000 jobs.
In contrast, some sectors showed resilience. Leisure and hospitality added 32,000 jobs, as did manufacturing, which also gained 32,000 positions. Trade, transportation, utilities, information, and other services each posted modest gains, but these were not enough to offset the broader losses in the service industries.
The employment picture also varied by company size. Small businesses, defined as those with fewer than 20 employees, experienced the largest losses, cutting 47,000 jobs. Medium-sized establishments reduced their payrolls by 15,000, while large companies with more than 500 employees added 30,000 jobs.
Regionally, the Midwest and Western U.S. saw the most significant job declines, losing 24,000 and 20,000 jobs respectively. The Northeast experienced a smaller drop of 3,000 jobs. The Southern U.S. was the only region to record net job growth, adding 13,000 positions.
Despite the decline in employment, wage growth remained steady. Annual pay for employees who stayed in their jobs rose by 4.4% year over year. Workers who changed jobs saw even stronger wage gains of 6.8%, although this was slightly down from 7.0% in May.
This combination of job losses alongside persistent wage growth presents a complex scenario for policymakers. On one hand, the weakening employment figures suggest the labor market is cooling, which could support a more accommodative monetary policy. On the other hand, sustained wage increases indicate ongoing inflationary pressures in the labor market, complicating decisions about interest rate cuts.
The ADP report’s unexpected contraction highlights vulnerabilities in the U.S. labor market that may not yet be fully reflected in broader economic indicators or stock market performance. Investors have been optimistic, with the S&P 500 recently reaching record highs, but the employment data suggest caution may be warranted.
ADP’s chief economist, Nela Richardson, noted that while layoffs remain rare, employers are showing greater reluctance to hire or replace departing workers, contributing to the overall job decline. This hesitancy could signal that businesses are bracing for slower growth or increased uncertainty.
It is important to note that ADP’s data covers payroll information from over 25 million U.S. employees and provides a high-frequency snapshot of private sector employment. However, it does not always align perfectly with the official government jobs report, which is scheduled for release shortly and is expected to show a more positive job growth figure.
The upcoming government nonfarm payroll report and weekly jobless claims data will provide further clarity on the labor market’s trajectory. Economists currently forecast a gain of 110,000 jobs for June and a slight uptick in the unemployment rate.
For now, the ADP report serves as a reminder that the labor market may be more fragile than headline numbers suggest. Businesses are cautious, and the uneven sectoral performance points to underlying challenges that could shape economic policy and market sentiment in the months ahead.
