U.S. "Small Non-Farm" jobs increase by only 22,000, below expectations; labor market cooling is evident

The latest “Non-Farm” report came in below expectations, indicating that the U.S. labor market continues to slow at the beginning of 2026.

On Wednesday (February 4), before the U.S. stock market opened, Automatic Data Processing, Inc. (ADP) released data showing that private sector employment increased by only 22,000 jobs in January, below the market expectation of 48,000, and down from 37,000 in December of last year.

Breakdown data shows that the entire goods industry added a total of 1,000 jobs, with construction adding 9,000 jobs, manufacturing decreasing by 8,000, and natural resources and mining remaining nearly unchanged compared to the previous month.

In the service sector, trade/transportation/utilities added 4,000 jobs, finance increased by 14,000, education and health services grew by 74,000, and leisure and hospitality added 4,000 jobs.

At the same time, the information industry decreased by 5,000 jobs, professional/business services declined by 57,000, and “other services” decreased by 13,000.

By company size, employment at small businesses (1-49 employees) was nearly unchanged from the previous month, medium-sized businesses (50-499 employees) increased by 41,000, and large businesses (500+ employees) decreased by 18,000.

The ADP report states that, in a sluggish hiring month, the health services sector performed strongly. The slowdown was led by manufacturing, professional/business services, and large enterprises.

The report specifically mentions that manufacturing has been losing jobs every month since March 2024. Nela Richardson, ADP’s Chief Economist, said, “The low growth over the past two years has kept me cautious, and the narrow hiring path is also concerning.”

Although there have been some signs of stabilization in U.S. employment in recent months, weaker-than-expected private sector job growth indicates that the labor market is still cooling in January.

Sarah House, Senior Economist at Wells Fargo, said, “I do see some signs of stabilization in the data. What we’re seeing today is a fairly stagnant labor market picture. Hiring hasn’t clearly worsened, but it hasn’t improved either.”

Recently, several large companies announced layoffs, including Dow and Amazon. However, the latest unemployment claims data show that large-scale layoffs are relatively limited.

Due to a partial federal government shutdown, the official employment data from the U.S. Bureau of Labor Statistics (BLS) has been delayed, so ADP data may be the most comprehensive indicator of January employment this week.

The BLS announced that the January non-farm payroll report, originally scheduled for release on Friday, will be rescheduled. The report will also include annual employment data revisions. Market analysts expect that employment growth over the year ending March 2025 will be significantly lower than initially estimated.

(Source: Caixin)