During a week when official jobs data was delayed due to another federal government shutdown, a new report from ADP offers a bleak snapshot of private employment, suggesting that broader labor market weakness may become apparent when the Bureau of Labor Statistics finishes tallying its January jobs numbers.
ADP, a payroll processing company, reported Wednesday that private employers added just 22,000 jobs last month. Economists polled by Dow Jones had predicted 45,000 payroll additions.
Researchers at ADP and the Stanford Digital Economy Lab also dialed back their December job estimates, revising the previously reported 41,000 job additions to 37,000.
Nela Richardson, chief economist at ADP, offered perspective on the 2025 labor market now that payroll ledgers have been flipped to the new calendar year.
“Job creation took a step back in 2025, with private employers adding 398,000 jobs, down from 771,000 in 2024,” Richardson commented in a press release. “While we’ve seen a continuous and dramatic slowdown in job creation for the past three years, wage growth has remained stable.”
In January, wages for people who stayed in their current jobs rose 4.5% over the preceding 12 months, roughly the same annualized growth as December. For workers who changed jobs, year-over-year pay growth slowed to 6.4% in January compared to 6.6% in December.
The net gains in January payrolls were driven almost entirely by the education and health services sector, which added 74,000 jobs. The professional and business services sector was the biggest loser, shedding 57,000 positions.
Despite President Donald Trump’s Liberation Day pledge that manufacturing jobs and factories would “come roaring back,” the manufacturing sector lost 8,000 jobs last month. That keeps the sector’s streak alive of losing jobs every month since March 2024, according to ADP data.
Large employers (defined as those employing 500 or more workers) jettisoned 18,000 jobs in January, while small establishments with 49 or fewer staffers broke even. Medium-sized businesses had around 41,000 job gains during the month.
Regionally, the Northeast and Midwest posted respective gains of 17,000 and 25,000 jobs, while the South and West regions experienced losses of approximately 10,000 and 11,000 positions.
Though ADP’s report doesn’t provide a full picture of the labor market, since it excludes public-sector employment data, it nonetheless suggests a concerning trend for Federal Reserve officials to monitor as they approach their next monetary policy meeting in March.
The Fed paused its streak of three consecutive rate cuts in January, noting in its official policy statement that the “unemployment rate has shown some signs of stabilization” and “inflation remains somewhat elevated.”
Since then, wholesale inflation readings, as measured by the producer price index, suggest that steadily rising supply-chain inflation could begin trickling through to consumer prices at a greater pace.
But a more pronounced slowdown in the labor market could cause Fed policymakers to restart their rate-cutting campaign sooner rather than later, according to Melissa Cohn, regional vice president of William Raveis Mortgage.
“If the job market remains in low gear, then that could open the door for the Fed to cut rates earlier in the year than expected,” Cohn said in commentary shared with Scotsman Guide.
Interest-rate traders still predict the Fed will wait until June to cut rates again, according to fed funds futures contracts tracked by CME FedWatch. But investor sentiment for June contracts remains largely split, underscoring the ongoing tensions to the Fed’s dual mandate of pursuing maximum employment and a 2% inflation target.
