The U.S. labor market opened 2026 on a notably weak footing, with private-sector hiring barely registering in January and reinforcing signs that the economy has settled into a prolonged slowdown rather than a sharp downturn.

New data from payroll processor ADP show that employers added just 22,000 jobs during the month, a figure that fell short of already muted expectations and underscored how narrow the sources of job growth have become.

The January gain was lower than December’s downwardly revised 37,000 increase and well below the Dow Jones forecast of 45,000. The headline number also masks a deeper fragility in the job market. Without a surge of 74,000 hires in education and health services, private employment would have declined outright. That concentration highlights the extent to which hiring momentum is no longer broad-based, but instead relies heavily on one structurally resilient sector.

Health care and education have been the primary engines of U.S. job growth for more than a year, driven by demographic pressures, persistent staffing shortages, and steady demand that is relatively insulated from interest-rate cycles. January’s data show that this dynamic has not changed. By contrast, most other sectors either grew marginally or contracted, suggesting that businesses remain cautious about expanding payrolls amid uncertainty around demand, borrowing costs, and global trade conditions.

Outside health-related roles, the gains were modest. Financial activities added 14,000 jobs, pointing to selective hiring in areas such as insurance, real estate, and financial services, even as parts of the sector face pressure from volatile markets. Construction employment rose by 9,000, likely reflecting ongoing infrastructure projects and pockets of resilience in non-residential building, despite higher financing costs. Trade, transportation, and utilities, along with leisure and hospitality, each added just 4,000 jobs, a subdued showing for sectors that typically benefit from consumer strength.

Losses, however, were more pronounced. Professional and business services shed 57,000 jobs, the steepest decline among all categories. That sector, which includes consulting, legal services, and corporate support functions, is often seen as a bellwether for white-collar confidence. The drop suggests companies are trimming discretionary spending and delaying expansion plans.

Manufacturing employment fell by 8,000, extending a period of weakness tied to soft global demand, elevated borrowing costs, and lingering effects of supply chain realignments. The “other services” category, which includes personal and repair services, lost 13,000 jobs, adding to evidence that parts of the consumer-facing economy are under strain.

In net terms, virtually all job creation came from the services sector, and even there it was narrowly concentrated. Goods-producing industries continued to lag, reinforcing concerns that the U.S. economy lacks the breadth of growth typically associated with a healthy labor market.

Company size data adds another layer to the picture. Mid-sized firms, employing between 50 and 499 workers, accounted for all of January’s net job gains. Small businesses were flat, while large employers cut 18,000 positions. This pattern suggests that big companies, which tend to be more exposed to capital markets, global trade, and shareholder pressure, are actively managing costs and headcount. Small firms, often more sensitive to financing conditions, appear reluctant to hire, likely reflecting tighter credit and uncertain demand. The totals do not add up precisely because of rounding, ADP noted.

Wage growth offered little new comfort as pay for workers who stayed in their jobs rose 4.5%, unchanged from December. While that pace is well below the peaks seen in the immediate post-pandemic period, it remains above levels typically associated with the Federal Reserve’s inflation target. For policymakers, this combination of weak hiring and still-firm wage growth complicates the outlook: the labor market is cooling, but not in a way that clearly alleviates underlying price pressures.

The January ADP report continues a trend that defined much of 2025: a low-hire, low-fire environment. Employers appear unwilling to expand aggressively, yet layoffs remain relatively contained. This stasis suggests companies are waiting for clearer signals on the economic trajectory, including the direction of interest rates, fiscal policy, and global growth.

ADP’s data usually precedes the more closely watched nonfarm payrolls report from the Bureau of Labor Statistics, which provides a fuller picture of employment, wages, and participation. That release, normally due Friday, has again been delayed by a partial U.S. government shutdown, leaving markets and policymakers without a timely official snapshot of the labor market.

Overall, the latest figures point to an economy entering 2026 with limited momentum. Hiring is narrow, confidence among employers appears subdued, and job growth depends heavily on health care and education. With manufacturing and professional services under pressure and wage growth still elevated, the labor market offers little clarity for policymakers debating whether current conditions warrant patience or a shift toward additional support.