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U.S. companies pulled back on hiring in June, adding far fewer workers than economists had penciled in, and the slowdown was uneven enough that it tells two different stories depending on which corner of the economy you look at. ADP (NASDAQ: ADP), the payroll processing firm whose monthly employment report has become one of the earliest reads on the health of the private sector, said today that private employers added a seasonally adjusted 98,000 jobs for the month. That figure came in below the Dow Jones consensus forecast of 110,000 and marked a step down from an unrevised 122,000 in May.
The industry breakdown is where the real story sits. Nearly half of June’s job growth, 48,000 positions, came from education and health services, which has been the most dependable source of hiring for well over a year. Trade, transportation and utilities added 15,000 jobs, financial activities gained 14,000 and other services contributed 8,000. Manufacturing added 5,000 positions and information added 7,000, while construction and leisure and hospitality each added a modest 2,000. Natural resources and mining was the lone sector to shed jobs, cutting 5,000 positions. Nearly all of June’s net gains, all but 2,000, came from service providing industries rather than goods producers.
“The pace of hiring is telling a story of both supply and demand,” said Nela Richardson, ADP’s chief economist. “We know it’s taking people longer to find work, but there also are signs of labor supply constraints in certain industries. For now, the overall effect is a slowdown in job creation”.
That comment gets at what makes this jobs cycle unusual. Companies are not laying off workers in large numbers, but they have also grown cautious about adding new ones, a pattern economists have taken to calling a low hire, low fire labor market. Fewer people quitting to chase new opportunities and fewer employers posting openings both point in the same direction, even as the unemployment rate has stayed relatively contained.
Pay data reinforces that picture of a market that has cooled without breaking down. Workers who stayed in their jobs saw annual pay gains hold steady at 4.4%, while those who switched employers saw their raises climb to 6.6%. That gap matters because it shows job changing still carries a meaningful financial reward, even in a year when fewer people are making that move. When the premium for switching jobs shrinks toward zero, it typically signals that workers have lost leverage entirely, and June’s data suggests that has not happened yet.
Company size also shaped where the jobs went. Businesses with fewer than 50 employees accounted for 53,000 of June’s new positions, more than half the total. Employers with 500 or more workers added 25,000 jobs, and mid sized companies, those falling between the two groups, added 29,000. Smaller firms carrying the bulk of hiring can be read as a sign of resilience among local and regional businesses, though it can also reflect that larger employers are the ones exercising the most restraint right now.
The ADP figures arrive two days ahead of the more closely watched nonfarm payrolls report from the Bureau of Labor Statistics, due out Thursday. Economists surveyed by Dow Jones expect that report to show payrolls rising by 115,000 for June, with the unemployment rate holding at 4.3%. Average hourly earnings are projected to rise 0.3% for the month and 3.5% from a year earlier. It is worth noting that ADP’s monthly count and the government’s payrolls figure often diverge, sometimes by a wide margin, so June’s soft ADP reading does not guarantee a similarly soft government number.
What today’s report really points to is a labor market that has not stalled but has narrowed. Healthcare and a handful of service sectors continue doing the heavy lifting, small businesses remain willing to hire even when larger firms hold back, and workers who do change jobs are still being rewarded for it. Whether that pattern holds will become clearer once the government’s own numbers land Thursday morning.
