Private companies added only 44,000 jobs in July, falling well short of market expectations and marking a sharp slowdown from the previous month.
The figure represents a significant drop from the downwardly revised 95,000 jobs added in June, and missed the Dow Jones consensus forecast of 75,000.
ADP, which processes payrolls for millions of businesses across the country, published the data on Wednesday as markets closely watched for labour market signals.
Virtually all of the job gains came from the services sector, which added 47,000 positions, while goods-producing industries saw a net decline of 3,000 jobs.
Education and health services led all sectors with 36,000 new roles, continuing a longstanding trend of the industry driving employment growth across the broader economy.
Financial activities contributed 10,000 jobs, professional and business services added 9,000, and the other services category posted a gain of 6,000 positions during the month.
Trade, transportation and utilities shed 8,000 jobs, natural resources and mining lost 6,000, while manufacturing managed only 2,000 new positions and construction added just 1,000.
Small firms employing fewer than 50 people led hiring by company size, accounting for 23,000 of the total new jobs added across all private employers in July.
Pay growth for workers staying in their jobs held steady at 4.4% annually, but those who switched jobs saw a 7% pay increase, the largest such gain since August 2025.
ADP chief economist Nela Richardson said: “Job-changers are highly sensitive to real-time economic conditions, and their rapid pay growth implies supply constraints in parts of the labor market.”
Richardson added: “Typical hiring patterns, meanwhile, are changing as employers react to shifting macroeconomic conditions.”
July’s employment gain was the smallest since January, during a year in which the labour market has steadied following limited progress seen throughout 2025.
Most Federal Reserve officials have expressed confidence in the jobs picture and are currently placing inflation concerns at the forefront of their policy considerations.
The Fed has held its benchmark interest rate steady, though markets are pricing in a potential hike before year-end if inflation data fails to improve sufficiently.
The ADP figures arrive two days ahead of the Bureau of Labor Statistics releasing its official nonfarm payrolls report, which economists surveyed by Dow Jones expect to show 83,000 new hires, with the unemployment rate holding at 4.2%.