Private payrolls in the U.S. increased by 98,000 in June, falling short of economists' expectations and the previous month's 122,000 gain, according to ADP's latest employment report released on July 1. This rise was below the forecasted 110,000 jobs and continued a recent trend where ADP reports have generally shown softer job growth compared to official government data. The ADP figures act as a preliminary indicator for the broader nonfarm payrolls report from the Bureau of Labor Statistics, which is highly anticipated later this week.

Nearly half of the new jobs added in June were concentrated in the education and health services sector, contributing 48,000 positions. The private sector job growth was overwhelmingly in services, with just 2,000 new jobs outside this category. Other sectors such as trade, transportation, utilities, financial activities, and various other services also experienced moderate employment gains. Conversely, natural resources and mining were the only industry to report losses, shedding 5,000 jobs, while leisure and hospitality continued its sluggish growth by adding only 2,000 jobs.

Wages showed stable annual pay increases, holding steady at 4.4% for workers who remained in their roles and rising slightly to 6.6% for those who switched jobs. Employment growth was skewed towards smaller companies, with businesses employing fewer than 50 workers accounting for 53,000 of the net new jobs. Mid-sized companies (50 to 499 employees) and large firms with over 500 workers added 29,000 and 25,000 jobs, respectively. Despite these gains, the overall slower pace reflects ongoing challenges balancing labor supply and demand amid lingering workforce constraints.

ADP's chief economist, Nela Richardson, highlighted that the pace of hiring underscores these mixed signals, noting that it is taking longer for individuals to find work while certain industries still face labor shortages. The job market in June appears to be cooling down, with a moderate slowdown in job creation despite continued payroll additions. The wider market will be watching Thursday’s official nonfarm payrolls report closely, with expectations for a 115,000 increase and a steady unemployment rate of 4.3%, alongside modest wage growth.