Private Payrolls Add Just 22K in January, Half Expected
ADP report shows weakest private hiring since mid-2024. Professional services shed 57K jobs as labor market cools ahead of Friday's nonfarm payrolls.
The labor market just flashed a warning sign that's hard to ignore.
Private employers added only 22,000 jobs in January, according to ADP's National Employment Report released Wednesday. Economists had expected 45,000. The December number was revised down to 35,000 from an already-weak initial print. That's two consecutive months of hiring that fell well short of what even pessimistic forecasters expected.
"Job creation took a step back in 2025, with private employers adding 398,000 jobs, down from 771,000 in 2024," said Nela Richardson, ADP's chief economist. January's pace suggests the deceleration is continuing into 2026.
Where the Jobs Aren't
The sector breakdown paints a bleaker picture than the headline number.
Professional and business services—a category that includes consulting, IT staffing, and corporate support—shed 57,000 positions, the largest decline in any single category. Manufacturing lost another 8,000 jobs, extending a losing streak that dates back to March 2024.
Without a 74,000-job surge in education and health services, the overall number would have been negative. That one sector accounted for more than three times the total gain—meaning the rest of the private economy was contracting.
| Sector | January Change |
|---|---|
| Education & Health | +74,000 |
| Financial Activities | +11,000 |
| Leisure & Hospitality | +8,000 |
| Professional & Business | -57,000 |
| Manufacturing | -8,000 |
| Information | -5,000 |
Pay growth for job-stayers held at 4.5% year-over-year, a rate the Fed considers slightly above its comfort zone. But the combination of slowing hiring and sticky wages creates an awkward setup—too cold for growth, too warm for aggressive rate cuts.
What It Means for Friday
The ADP report has a mixed track record predicting the Bureau of Labor Statistics nonfarm payrolls number, which drops Friday morning. The two data sets use different methodologies and often diverge by wide margins. In December, ADP showed 37,000 while BLS reported 50,000—both weak, but different magnitudes.
Still, the directional signal matters. The ADP miss follows a December jobs report that already showed the slowest hiring since the pandemic. If Friday's BLS print confirms the ADP trend, it will strengthen the case for the Fed to resume cutting rates sooner than the one cut most policymakers currently project for 2026.
Markets are pricing two cuts this year starting in June, according to CME's FedWatch tool. The Fed held rates steady at 3.5-3.75% at its January meeting, and officials have signaled patience. But a labor market that's generating barely 20,000 private-sector jobs a month changes the calculus.
The Low-Hire, Low-Fire Paradox
Richardson described the current environment as "low-hire, low-fire"—employers aren't laying people off in large numbers, but they aren't bringing new workers on either. The unemployment rate sits at 4.4%, stable but not improving.
This is the kind of labor market that frustrates everyone. Job seekers face fewer openings. Employers deal with sticky wages for existing staff. And the Fed gets conflicting signals—cooling employment that argues for cuts versus above-target wage growth that argues for patience.
For traders positioning ahead of Friday's report, the ADP miss suggests downside risk to the consensus estimate. A weak nonfarm print could accelerate the rally in Treasuries and add pressure to equity markets already dealing with tech volatility and earnings uncertainty.
The bond market noticed. The 10-year yield fell 4 basis points to 4.38% Wednesday, its lowest level in three weeks.