ADP payrolls miss by 20,000 as US hiring slows to 98,000 in June

US private employers added 98,000 workers in June, missing the 118,000 consensus and extending a three-month slowdown in hiring.

US companies added 98,000 workers in June, the weakest monthly gain since January and 20,000 below the median forecast, ADP data showed Wednesday, as the labor market shifts from post-pandemic catch-up hiring to a slower equilibrium.

"The pace of hiring is telling a story of both supply and demand," Nela Richardson, chief economist at ADP, said in a statement. "We know it's taking longer for people to find work, but there are also signs of labor supply constraints in certain industries."

The education and health services sector accounted for nearly half of all payroll growth, adding 48,000 positions, followed by trade, transportation and utilities at 15,000 and financial activities at 14,000. Small businesses with fewer than 50 employees drove the bulk of gains with 53,000 new jobs, while large firms with 500 or more workers added 25,000. The May figure was unrevised at 122,000.

The miss adds to evidence that the Federal Reserve's restrictive policy stance is gradually cooling the labor market, though a 53 percent drop in planned layoffs suggests employers are hoarding workers rather than cutting. Markets now face a mixed signal: weaker hiring supports rate-cut expectations, but resilient layoff data argues against urgency.

The ADP reading marks the third consecutive month of decelerating private payroll growth after a 122,000 gain in May and 156,000 in April. The three-month average of 125,000 compares with 183,000 during the same period a year earlier, a trend that, if sustained, would bring the labor market closer to the Fed's definition of full employment.

The 53 percent plunge in planned layoffs, reported separately by Challenger, Gray & Christmas, complicates the narrative. Companies are hiring less but firing even less — a pattern consistent with a wait-and-see posture rather than outright deterioration. The last time layoffs dropped by a comparable margin was in the second quarter of 2023, when employers were reluctant to shed staff after struggling to rehire following the pandemic.

For the Fed, the data offers little clarity ahead of the July 28-29 meeting. The weaker headline supports the case for a rate cut as soon as September, but the layoff data and still-elevated wage growth — running at about 4.5 percent annually — give hawks room to argue for patience. Fed funds futures currently price roughly 50 basis points of cuts by year-end, according to CME data.

This article is for informational purposes only and does not constitute investment advice.