U.S. private sector employment shockingly dropped by 33,000 jobs in June, marking the first decline in over two years and dramatically missing economists’ expectations of 95,000-100,000 job gains.
Key Takeaways
- The private sector lost 33,000 jobs in June 2025, the first decline since March 2023, falling far short of expected gains of 95,000-100,000 jobs
- Professional services, education, health, and financial sectors suffered losses, while leisure, hospitality, manufacturing, and construction showed gains
- Small businesses were hit hardest, while larger firms maintained payroll growth
- Despite hiring slowdowns, layoffs remain low with job cuts down 49% in June compared to May
- Pay growth continues at 4.4% annually for job stayers and 6.8% for job changers, indicating underlying labor market strength
Unexpected Employment Decline Signals Economic Uncertainty
The June private sector employment report delivered a significant economic surprise as payrolls fell by 33,000 jobs, marking the first decline since March 2023. This drop stands in stark contrast to economists’ expectations of 95,000-100,000 job gains and ends a streak of over two years of consistent employment growth. The report from ADP, released ahead of the government’s official employment figures, indicates a potential cooling in what has otherwise been a resilient labor market. Regional disparities were evident, with the Midwest and Western U.S. experiencing the largest contractions while the Southern U.S. continued to see job growth.
“Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month,” said Nela Richardson, ADP’s chief economist.
Sector Performance Reveals Economic Patterns
The employment decline wasn’t uniform across all sectors. Professional and business services, education and health services, and financial activities sectors bore the brunt of job losses. Meanwhile, leisure and hospitality, manufacturing, and construction industries showed positive job gains, highlighting the uneven nature of the current economic environment. Small businesses were disproportionately affected by the downturn, while larger companies managed to maintain payroll growth. This pattern suggests that smaller enterprises may be more vulnerable to economic uncertainties and potentially face greater challenges accessing capital or managing costs in the current environment.
“Use ADP only to gauge the big picture,” advised Carl Weinberg, chief economist at High Frequency Economics. “Right now, that picture shows ADP’s private sector employment estimates declining steadily since December. Today’s big drop underscores that decaying trend.”
While the ADP report provides valuable insights, economists note its historical inconsistency in predicting the Bureau of Labor Statistics’ official employment figures. Economists still expect the government’s forthcoming employment report to show an increase of 105,000 private payrolls and overall nonfarm payroll growth of 110,000 jobs in June, with unemployment potentially rising to 4.3% from May’s 4.2%. The disconnection between ADP and BLS data underscores the complexity of assessing the true state of the labor market.
Mixed Signals: Low Layoffs Amid Hiring Reluctance
Despite the overall job losses, one encouraging sign is that layoffs remain relatively low. Challenger, Gray & Christmas reported a 49% drop in job cuts in June compared to May, with planned layoffs in the second quarter down 50% from the first quarter. However, planned hires also decreased substantially to 3,191 in June from 9,683 in May, reflecting continued employer caution. The JOLTS report further confirmed this trend, showing a decline in hires while job openings per unemployed person increased, suggesting employers are posting positions but are hesitant to fill them.
“Without a strong economic driver, hiring may remain measured through the rest of the year,” stated Andrew Challenger, senior vice president at Challenger, Gray & Christmas.
A silver lining remains in wage growth data. Despite the slowdown in hiring, pay increases for employees continued, with annual pay up 4.4% in June. Employees who switched jobs saw even higher increases at 6.8%, though this was slightly down from 7% the previous month. This ongoing wage growth suggests that while employers may be reluctant to add new positions, they remain willing to compensate existing workers competitively to retain talent in what continues to be a tight labor market overall.
President Trump’s Economic Outlook
Despite the job losses, President Trump remains optimistic about the economic trajectory. He has emphasized that the country is experiencing substantial investment inflows and pointed to tariff revenues strengthening the Treasury. Trump has characterized the current economic situation as recovering from the previous administration’s policies, with his initiatives fostering what he describes as an “economic renaissance.” His administration’s focus on domestic manufacturing, tariff policies, and the newly passed spending bill is central to his economic strategy moving forward.
“Trillions of Dollars are now being invested in the USA, more than ever before. Likewise, hundreds of Billions of Dollars in Tariffs are filling up the coffers of the Treasury. The Tariff money has already arrived and is setting new records!” Trump wrote. “We are growing our way out of the Sleepy Joe Biden MESS that he and the Democrats left us, and it is happening much faster than anyone thought possible. Our Country will make a fortune this year, more than any of our competitors, but only if the Big, Beautiful Bill is PASSED!”
The contrast between the unexpected job losses and the administration’s positive economic messaging highlights the complex nature of the current economy. While certain indicators suggest a slowdown, others—including low layoff rates and continued wage growth—point to underlying resilience. As the Federal Reserve weighs potential interest rate adjustments and the government’s official employment report approaches, both policymakers and businesses will be carefully monitoring these mixed signals to navigate the uncertain economic landscape ahead.
