Hiring at US private companies slowed sharply in July, with healthcare accounting for the bulk of new jobs as employers adopted a more cautious approach to recruitment amid shifting economic conditions.
According to payroll processing firm ADP, private nonfarm employment rose by a seasonally adjusted 44,000 jobs during the month, falling well short of economists’ expectations for a gain of 75,000.
The increase also marked a slowdown from June’s revised figure of 95,000.
The latest reading suggests hiring momentum weakened considerably at the start of the third quarter, even as wage growth remained resilient and layoffs stayed historically low.
Almost all of the new jobs came from the services sector, which added 47,000 positions during the month.
By contrast, goods-producing industries collectively lost 3,000 jobs.
Healthcare and education continued to dominate hiring, adding 36,000 jobs, extending the sector’s longstanding role as the biggest contributor to employment growth.
Financial activities added 10,000 jobs, while professional and business services contributed 9,000 positions.
The other services category recorded an increase of 6,000 jobs.
Several industries posted declines.
Trade, transportation and utilities shed 8,000 jobs, while natural resources and mining lost 6,000.
Manufacturing added only 2,000 jobs, and construction employment increased by just 1,000.
Smaller firms lead hiring
Hiring was relatively balanced across company sizes, though businesses employing fewer than 50 workers accounted for the largest share of new jobs, adding 23,000 positions.
This statistic included businesses with fewer than 20 workers adding 27,000 workers, while those between 20-49 workers lost 4,000 employees.
Despite slower hiring, wage growth remained stable.
Employees who stayed with their current employers received average annual pay increases of 4.4%, unchanged from previous months.
Workers who switched jobs continued to enjoy stronger salary gains, with annual wage growth accelerating to 7%, the fastest pace since August 2025.
“Job-changers are highly sensitive to real-time economic conditions, and their rapid pay growth implies supply constraints in parts of the labor market,” ADP Chief Economist Nela Richardson said.
“Typical hiring patterns, meanwhile, are changing as employers react to shifting macroeconomic conditions.”
The July increase marked the smallest monthly gain since January, continuing a year in which labour market growth has remained modest after little progress in 2025.
Report follows weaker job openings data
The ADP report follows Tuesday’s Job Openings and Labor Turnover Survey (JOLTS), which showed that available positions declined by 178,000 to 7.359 million at the end of June, largely reflecting weaker labour demand in healthcare and social assistance.
However, the JOLTS report also showed employers stepped up hiring during June while layoffs remained subdued, reinforcing the view that the labour market is slowing gradually rather than entering a downturn.
Economists noted that layoffs remain well below historical averages and lower than a year ago, indicating employers are generally retaining workers despite weaker recruitment activity.
The latest labour market indicators are being closely watched by the Federal Reserve as policymakers weigh persistent inflation pressures against signs of softer employment growth.
While most Fed officials have continued to express confidence in the labour market, inflation remains their primary concern.
The central bank has kept interest rates unchanged, although financial markets continue to price in the possibility of another rate increase later this year if inflation fails to ease.
Attention now shifts to Friday’s official employment report from the Bureau of Labor Statistics.
Economists surveyed by Dow Jones expect the US economy to have added 83,000 nonfarm jobs in July, up from 57,000 in June, while the unemployment rate is forecast to remain unchanged at 4.2%.
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