The latest data released on Wednesday indicates that the US ADP employment report, often seen as a precursor to the official non-farm payrolls, showed slower-than-expected growth in June. However, indicators such as a sharp decline in layoffs and accelerating wage growth suggest the US labor market remains resilient.
According to the ADP National Employment Report, private sector employment increased by 98,000 jobs in June. This figure fell short of the 120,000 gain economists had anticipated and also marked a slowdown from the 122,000 increase recorded in May. Despite this, the ADP data still indicates that private hiring remains solid, having just concluded its strongest three-month period of hiring momentum in over a year.
The report, produced jointly by ADP and the Stanford Digital Economy Lab, also revealed wage trends. The median annual pay increase for job-changers accelerated to 6.6% year-over-year, up from the previous month's reading. In contrast, pay growth for those who stayed in their jobs remained largely steady at 4.4%.
From an industry perspective, nearly half of the job gains in June—approximately 48,000—came from the education and health services sector, which has consistently been a steady engine for employment growth. The service-providing sector as a whole added 96,000 jobs, with a mere 2,000 positions coming from the goods-producing sector. Other industries that saw employment gains included trade, transportation, and utilities (+15,000), financial activities (+14,000), and other services (+8,000).
The natural resources and mining sector lost 5,000 jobs, making it the only industry to record a decline. The leisure and hospitality sector added just 2,000 positions, continuing its weak performance this year, which is often viewed as a barometer for consumer demand.
Key Employment Trends by Company Size
When broken down by company size, job growth was more pronounced among smaller firms. Establishments with fewer than 50 employees added 53,000 jobs. Large enterprises with over 500 workers added 25,000 positions, while medium-sized firms contributed a gain of 29,000 jobs.
Layoffs Plunge, Signaling Structural Market Strength
Contrasting with the slower ADP job growth, companies appear highly reluctant to cut staff. Data released the same day by global outplacement firm Challenger, Gray & Christmas showed planned layoffs by US employers in June plummeted by 53% month-over-month to 45,849. The total number of job cuts announced in the first half of the year was down 40% compared to the same period in 2025.
Andy Challenger, a senior executive at the firm, noted, "The pace of job cuts slowed significantly in June, aligning with typical seasonal patterns. However, current layoffs remain concentrated in the technology sector, where artificial intelligence (AI) continues to reshape companies' workforce planning."
Despite the reduction in layoffs, the labor market presents a mixed picture. Data shows that announced hiring plans by companies in June decreased by 44% from the previous month. Nela Richardson, chief economist at ADP, commented, "The current pace of hiring reflects signals from both supply and demand. We are seeing that it's taking longer for people to find jobs, yet in certain specific sectors, there are indeed signs of constrained labor supply. Overall, the interplay of these factors is resulting in slower employment growth."
This phenomenon is also reflected in a Conference Board survey, where the proportion of consumers who believe jobs are "hard to get" rose in June to its highest level in nearly five and a half years.
Market Awaits Official Non-Farm Payrolls Report
The ADP data is traditionally viewed as a preview for the official non-farm payrolls report. The US Labor Department is scheduled to release the more comprehensive June non-farm payrolls report on Thursday. Market consensus currently forecasts a total non-farm payroll increase of 115,000 jobs, which would be lower than the 172,000 gain in May. A surge in government hiring seen in May is not expected to repeat in June. If expectations are met, this would still represent the strongest half-year of hiring performance for the US since mid-2024.
The market expects the unemployment rate to hold steady at 4.3%. Average hourly earnings are projected to rise 0.3% month-over-month and 3.5% year-over-year. A robust labor market with resurgent wage growth could solidify market expectations that the Federal Reserve will continue raising interest rates this year to combat inflation.
Furthermore, with the recent provisional agreement between the US and Iran to de-escalate conflict, easing geopolitical tensions in the Middle East could lead to lower energy prices and potentially improve consumer confidence, which may provide an additional boost to the job market.
However, given the frequent discrepancies between ADP data and the official non-farm payrolls figures, the final assessment of the employment situation still awaits confirmation from the official report.
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