US Private Sector Sheds 33,000 Jobs in June 2025 Amid Hiring Hesitancy in Services Sector

Private businesses in the United States unexpectedly cut 33,000 jobs in June 2025, marking the first net decline in employment since March 2023 and sharply undercutting market forecasts of a 95,000-job gain, according to the latest ADP National Employment Report. The figure follows a downwardly revised drop of 29,000 in May, suggesting a broader cooling trend in the private labor market. The weakness was concentrated in the services-producing sector, while goods-producing industries continued to post moderate gains.

The June report highlights a significant inflection point in private-sector hiring dynamics. Losses were particularly heavy in professional and business services (-56,000 jobs), education and health (-52,000), and financial activities (-14,000). These three categories alone accounted for over 120,000 job losses, more than offsetting gains in leisure and hospitality (+32,000), trade/transportation/utilities (+14,000), and information (+5,000). The decline in professional and business services is especially concerning given the sector’s historically strong contribution to white-collar employment and its role as a leading indicator of corporate investment confidence.

By contrast, the goods-producing sector added 32,000 jobs, with manufacturing (+15,000), construction (+9,000), and natural resources and mining (+8,000) each contributing positively. This divergence signals that while consumption and investment in physical infrastructure and commodities remain relatively robust—potentially buoyed by ongoing federal spending and industrial policy—white-collar service sectors may be scaling back due to margin pressures, automation, and delayed client demand.

Dr. Nela Richardson, chief economist at ADP, attributed the job losses to a growing “hesitancy to hire and a reluctance to replace departing workers,” emphasizing that while layoffs remain rare, companies are taking a more cautious approach amid uncertain macroeconomic signals. This behavior may reflect concerns about the long-term impact of tariffs, especially after President Trump confirmed 20%–40% import duties on a wide range of consumer goods and capital equipment from multiple trading partners, adding cost pressures to firms already managing volatile input prices and cautious consumer sentiment.

Despite the employment contraction, wage growth remained relatively stable. Annual pay for job-stayers edged down only slightly to 4.4% in June from 4.5% in May, while job-changers saw a decline to 6.8%, from 7%. These figures suggest that wage inflation, while easing at the margins, is still elevated compared to pre-pandemic norms, reinforcing the Federal Reserve’s challenge in managing inflation expectations without overtightening monetary conditions. The persistence of above-4% wage growth—particularly for job-switchers—indicates that labor market tightness, especially in high-demand skill areas, continues to support compensation growth even as aggregate hiring softens.

The June report adds complexity to the broader macroeconomic picture. While headline non-farm payroll data from the Bureau of Labor Statistics has remained relatively firm, the ADP report—focused exclusively on private payrolls—offers a granular view into employer sentiment and sectoral divergence. The downturn in private services hiring could be an early signal of a broader slowdown, particularly if compounded by rising interest rates, reduced corporate investment, and subdued consumer confidence.

From a regional perspective, anecdotal evidence suggests that hiring freezes and slowdowns have been most acute in urban centers on the West Coast and Northeast, particularly in tech and financial services hubs. Meanwhile, the Midwest and Sunbelt states continue to show relative strength, underpinned by manufacturing expansion and public investment in energy, infrastructure, and logistics.

The data comes ahead of the next Federal Open Market Committee (FOMC) meeting, and while the Fed is widely expected to hold rates steady in July, continued labor softness—if confirmed by BLS data—could revive discussions of a rate cut as early as September, especially if inflation remains on a downward path. However, policymakers will likely want to see confirmation across multiple data points before altering the monetary stance, particularly given the mixed signals from wage growth and household spending.

In conclusion, the unexpected 33,000-job decline in US private payrolls for June 2025 highlights a growing cautiousness among employers, particularly in the services economy. While goods-producing sectors remain resilient and wage growth has yet to fully roll over, the weakening in core services hiring poses a risk to broader labor market health. As businesses navigate an uncertain mix of tariffs, regulatory shifts, and global demand pressures, hiring may continue to decelerate even without a spike in layoffs—creating a more subtle, but significant, drag on economic momentum.

Sources

Automatic Data Processing, Inc. (2025). ADP National Employment Report – June 2025. [https://www.adp.com]

Federal Reserve Board. (2025). FOMC Forward Guidance – Labor Market Risk Indicators.

Bureau of Labor Statistics. (2025). Sectoral Employment and Wage Trends – Preview to July NFP.

Goldman Sachs Research. (2025). Private Sector Cooling Amid Fiscal and Trade Headwinds.

Bloomberg. (2025). ADP Job Losses Underscore Hiring Reluctance in Core US Industries.