U.S. private payroll growth moderated during the month of June, according to an ADP report released Wednesday, which appears to be a sign of a possible slowdown in the U.S. labor market.

Businesses added 150,000 jobs during the month of June, down from an upwardly revised 157,000 in May and below the Dow Jones consensus forecast of 160,000. This number represents the lowest monthly gain recorded since January.

Without the increase in hiring in the leisure and hospitality sector, the total number would have been considerably lower. This sector added 63,000 jobs, the largest increase among categories measured by payroll processing firm ADP.

Sectors with job gains

Sectors with increases included construction (27,000), professional and business services (25,000), other services (16,000), and trade, transportation, and utilities (15,000).

In contrast, natural resources and mining experienced a decline of 8,000 jobs, manufacturing recorded a loss of 5,000, and the information sector declined by 3,000 jobs.

Nela Richardson, ADP chief economist, noted:

“Job growth has been solid, but not across the board. Had it not been for a pickup in hiring in the leisure and hospitality sector, June would have been a disappointing month.”

Slowdown in wage increases

Wage increases also slowed for those who kept their jobs, falling to 4.9% year-on-year, the smallest increase since August 2021. Those who changed jobs posted a 7.7% increase, a figure that has also been trending downward.

Job creation came mostly from firms employing between 50 and 499 workers, a group that added 88,000 jobs in the month. Small businesses contributed just 5,000 jobs. Geographically, 80,000 jobs came from the South, more than half of the total.

The ADP report is a preview of the nonfarm payrolls count, which the Labor Department will announce on Friday. The report is expected to indicate an increase of 200,000 jobs, following May’s 272,000.

Divergences between the ADP and BLS reports

The two reports often differ, sometimes considerably, as ADP consistently understates the Bureau of Labor Statistics (BLS) count. In May, BLS reported that private payrolls increased by 229,000, or 72,000 more than ADP’s estimate.