cooler growth than anticipated

Private sector hiring slowed sharply in July, with most job growth stemming from healthcare, according to payroll processor ADP. The month's nonfarm job growth, excluding government, came in at a seasonally adjusted 44,000, falling short of both June's revised 95,000 and the Dow Jones consensus forecast of 75,000. All gains were concentrated in the services sector, which added 47,000 positions, while manufacturing and construction saw modest growth of just 2,000 and 1,000 respectively.

Education and health services led the sector with 36,000 new jobs, continuing a historical pattern of leading employment growth. Other sectors such as financial activities, professional and business services, and distribution added 10,000, 9,000, and 6,000 jobs respectively. Trade, transportation and utilities shed 8,000 positions, while natural resources and mining declined by 6,000.

On average, both job retainers and changers saw a 4.4% annual pay increase, though switchers benefited the most, with a 7% increase - the highest since August 2025. ADP's chief economist, Nela Richardson, attributed this to heightened sensitivity among job-switchers to real-time economic conditions, indicating potential supply constraints in certain labor market segments.

The month's job growth marked the smallest gain since January during a year in which the labor market has steadied after a lackluster 2025. Most Federal Reserve officials remain confident in the jobs picture, putting inflation concerns first, and have kept their benchmark interest rate steady, although markets anticipate a potential hike before year's end if inflation data does not improve.

This ADP report precedes the Bureau of Labor Statistics' official nonfarm payrolls report for July, with economists expecting that count to show 83,000 new hires, up from June's 57,000, and the unemployment rate remaining at 4.2%.