Private-sector employment in the U.S. expanded more than expected in January, with 183,000 new jobs added, according to ADP's National Employment Report released Wednesday. The data underscores a resilient labor market despite ongoing economic uncertainties and potential Federal Reserve policy shifts.
The monthly figure exceeded economists' expectations of 150,000 and marked an increase from the revised 176,000 jobs added in December, originally reported as 122,000. Pay growth for workers who stayed in their jobs rose at an annual 4.7% rate, slightly above December's pace.
However, the report revealed a sectoral divide in job creation. Service-providing industries accounted for all 190,000 new jobs, while goods-producing sectors lost 6,000 positions. Manufacturing led the declines, shedding 13,000 jobs, while construction and natural resources gained modestly.
"We had a strong start to 2025, but it masked a dichotomy in the labor market," ADP Chief Economist Nela Richardson said. "Consumer-facing industries drove hiring, while job growth was weaker in business services and production."
Key industry breakdowns:
- Trade, transportation, and utilities: +56,000 jobs
- Leisure and hospitality: +54,000 jobs
- Education and health services: +20,000 jobs
- Professional and business services: +14,000 jobs
- Financial activities: +13,000 jobs
- Information sector: +18,000 jobs
In contrast, goods-producing sectors struggled:
- Manufacturing: -13,000 jobs
- Construction: +3,000 jobs
- Natural resources and mining: +4,000 jobs
Regional hiring trends showed the Midwest leading gains with 64,000 new jobs, followed by the West with 70,000 and the South adding 50,000. The Northeast saw the slowest growth at 22,000 jobs.
The job market's resilience has placed the Federal Reserve in a watchful position as policymakers weigh future rate decisions. In 2024, the Fed cut rates by one percentage point to support economic stability, but officials have signaled a cautious approach to further easing, closely monitoring employment and inflation trends.
The ADP report precedes the Bureau of Labor Statistics' (BLS) official nonfarm payrolls report due Friday, which includes government hiring. Economists anticipate 169,000 new jobs in January, with the unemployment rate expected to hold steady at 4.1%. The two reports often diverge, but ADP has expanded its payroll data sample to 14.8 million observations, up from nearly 10 million at launch, in an effort to improve accuracy.
Despite broader hiring momentum, wage growth appears to be stabilizing. Pay increases for job-stayers held at 4.7%, while job-changers saw an average raise of 6.8%, reflecting a cooling from earlier highs.