The U.S. private sector experienced a surprising contraction in June 2025, with a net loss of 33,000 jobs, according to the latest ADP® National Employment Report.
This figure marks an unexpected turn and the first decline or job loss in the private sector since early 2023, defying economists’ forecasts that had anticipated modest gains.
The report, a collaboration between the ADP Research Institute and the Stanford Digital Economy Lab, is a key indicator of the labor market based on payroll data from over 25 million employees in the U.S.
The job loss was primarily driven by notable weakness in the services sector.
Breakdown by Sector:
Services Decline While Goods Production Shows Resilience
The services sector was the hardest hit, with a total loss of 66,000 jobs. The most significant declines occurred in:
- Professional and Business Services: -56,000 jobs
- Education and Health Services: -52,000 jobs
- Financial Activities: -14,000 jobs
In contrast, the goods-producing sector showed resilience, adding a total of 32,000 jobs.
Gains in this area were led by:
- Manufacturing: +15,000 jobs
- Construction: +9,000 jobs
A bright spot within the services sector was Leisure and Hospitality, which continued its growth streak by adding 32,000 jobs.
“While layoffs remain uncommon, hesitation to hire and reluctance to replace workers who leave led to last month’s job losses,” said Dr. Nela Richardson, chief economist at ADP.
“Still, the slowdown in hiring has yet to affect wage growth.”
According to the report, annual pay for those who kept their jobs rose by 4.4% compared to the previous year, indicating that the labor market, though cooling in terms of hiring, continues to show wage pressures.
Impact on Businesses and Future Outlook
Small and medium-sized businesses felt the contraction the most. Companies with fewer than 50 employees lost 47,000 jobs, highlighting the challenges small businesses face in the current economic climate.
This ADP report precedes the release of the government’s official employment data by the Bureau of Labor Statistics (BLS), which will be published this Thursday. Analysts will be watching closely to see if the BLS data confirms this unexpected downward trend in the U.S. labor market.
