US ADP payrolls miss by 21,000 as labor market recovery stalls

US companies added 98,000 workers in June, the weakest monthly gain since January and well below the 119,000 consensus, signaling the labor market recovery is losing momentum.

"The ADP miss confirms what the JOLTS data has been telegraphing — hiring demand is softening even as job openings remain elevated," said Nicole Bachaud, economist at ZipRecruiter.

The reading undershot the 122,000 gain in May and fell 18 percent short of the median estimate in a Bloomberg survey of economists. The miss comes after the Bureau of Labor Statistics reported 7.6 million job openings in May, above the 7 million forecast, while actual hiring dipped to 5.17 million from 5.26 million in April.

The weakening payroll data could bolster the case for the Federal Reserve to begin cutting interest rates as soon as September, with swaps markets pricing in a 62 percent probability of a quarter-point reduction at the September meeting. The next official test of labor market health comes Thursday, when the Labor Department releases its June nonfarm payrolls report, expected to show 100,000 jobs added and unemployment holding at 4.3 percent.

The ADP figures add to a mixed picture of the US labor market. Job openings have remained surprisingly resilient — the 7.6 million in May exceeded the 7 million economists had forecast — but employers have been slow to convert those openings into actual hires. Gross hiring in May was 5.17 million, the lowest since December and well below the 6 million-plus monthly pace that prevailed from mid-2021 to mid-2023.

The disconnect between job openings and hiring reflects lingering caution among employers. After the Iran conflict sent energy prices surging earlier this year following the closure of the Strait of Hormuz, businesses pulled back on expansion plans. President Donald Trump's tariff policies and high interest rates further discouraged hiring decisions in 2025, when the economy added just 9,700 jobs per month on average — the weakest pace outside a recession since 2002.

The recovery in 2026 has been uneven. Through the first five months of the year, employers added an average of nearly 114,000 net jobs per month. But the June ADP reading suggests that pace may be slowing. Economists have noted that the so-called "break-even" rate of hiring needed to keep unemployment stable has fallen sharply, potentially to as low as zero jobs per month, because of reduced immigration under Trump's crackdown and an aging population that has slowed labor force growth.

"This is a labor market that is stabilizing, not collapsing," said Gwen Zemmer, economist at Oxford Economics. "But the hiring switch needs to fully turn on for the labor market to feel alive again."

This article is for informational purposes only and does not constitute investment advice.