U.S. Private Payrolls Grew by 98,000 in June, ADP Reports, Missing Forecasts and Signaling a Hiring Slowdown

Private sector employment in the United States grew by 98,000 jobs in June, the smallest increase in three months, according to the National Employment Report released Wednesday by payroll processor ADP. The figure fell short of economists’ expectations and suggests a continued moderation in the pace of hiring as businesses navigate a complex economic landscape.

The June total represents a decline from the unrevised 122,000 jobs added in May and came in below the Dow Jones consensus forecast of 110,000. The report points to a labor market that, while still expanding, is doing so unevenly and at a slower clip. “The pace of hiring is telling a story of both supply and demand,” said Nela Richardson, chief economist at ADP. “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.”

For small and mid-sized business owners, this mixed report presents a complex operational challenge. While the headline number signals caution, the details show that small establishments with fewer than 50 employees were once again the primary engine of job growth, adding 53,000 positions. This creates a difficult balancing act: the need to hire to meet demand versus the uncertainty of a cooling economy and persistent wage pressures, especially for attracting new talent. Our experience shows that in such an environment, efficiency becomes paramount. Companies that can do more with their existing resources are better positioned to weather economic shifts, whether that means managing growth sustainably or protecting margins during a slowdown.

This is where strategic planning through business process reengineering becomes critical for long-term stability and profitability. Instead of reacting solely to monthly hiring data, we help clients analyze and optimize their core workflows, from supply chain management to internal financial controls. By streamlining operations, businesses can increase capacity and improve service delivery without necessarily adding to their headcount, creating a more resilient foundation. To navigate these operational crosscurrents and build a more efficient organization, business leaders can get started by contacting C&S Finance Group LLC at csfinancegroup.com for guidance.

A detailed breakdown of the June numbers reveals a highly concentrated and uneven hiring landscape. The service-providing sector was responsible for nearly all the gains, adding 96,000 jobs, while the goods-producing sector added a mere 2,000. Within services, the education and health services industry was the clear leader, creating 48,000 jobs—accounting for nearly half of the total private sector increase. Other sectors posting modest gains included trade, transportation, and utilities with 15,000 new jobs, and financial activities, which added 14,000.

Conversely, several key industries showed signs of stagnation. The leisure and hospitality sector, a major driver of post-pandemic job recovery, added only 2,000 jobs, marking its sixth consecutive month of weak hiring. Professional and business services and construction also added just 2,000 jobs each, suggesting that demand in these areas may be softening. Manufacturing saw a slight increase of 5,000 positions, while the information sector added 7,000.

When viewed by establishment size, small businesses with fewer than 50 employees continued to lead the way, contributing 53,000 jobs to the June total. Medium-sized businesses, defined as those with 50 to 499 employees, added 29,000 jobs. The largest companies, those with 500 or more employees, lagged behind with an increase of just 25,000 positions, reinforcing the trend of small enterprises being the most active in the current hiring market.

The report also provided insights into wage growth, which remains a key factor for both employers and the Federal Reserve. Annual pay for employees who remained in their jobs was up 4.4% year-over-year, a rate that held steady from the previous month. However, for those who switched jobs, pay gains edged higher to 6.6%, indicating that companies are still willing to pay a premium to attract new talent with specific skills. This dynamic exists alongside other reports suggesting a five-year high in the number of Americans who believe jobs are “hard to get,” creating a paradoxical environment for both businesses and workers.

The ADP data serves as a key precursor to the Department of Labor’s more comprehensive jobs report. The Federal Reserve is monitoring employment data closely as it weighs future decisions on interest rates, with officials currently viewing the labor market as stable. The initial market reaction to the ADP report was muted, with stock futures pointing to a lower open on Wednesday.

All eyes will now turn to the official U.S. employment report from the Bureau of Labor Statistics, which is scheduled for release on Thursday, a day earlier than usual due to the July 4 holiday. Economists surveyed by MarketWatch are predicting that the BLS data will show an increase of 115,000 nonfarm payrolls for June, which would represent a slightly more optimistic picture than the one painted by ADP.