U.S. July ADP Employment - Slowest since January, but payrolls may outperform
July’s ADP’s estimate of private sector employment of 44k is on the weak side of expectations, and even compared to the 60k implied by weekly ADP data in the preceding week, implying a further loss of momentum in the latest week. The gain is the slowest since January. We still however see risk of the non-farm payroll outperforming ADP data, after underperforming in June.
Our payroll forecast is 120k, with 110k in the private sector. We expect the payroll report to be supported by a correction higher in leisure and hospitality after a surprising 61k decline in the sector in June. Leisure and hospitality was weak in the July ADP report, falling by 11k, but after a near flat June, meaning payrolls have rebound scope in the sector that ADP did not.
The ADP gain was led by education and health, a sector that has led most rennet non-farm payroll gains, rising by 36k. Financial at 10k and information at 5k were both positive. These sectors have tended to be weak in recent payroll data, with AI seen behind the losses. Manufacturing at 2k and construction at 1k were almost unchanged in the ADP report.
Pay gains for job-stayers were unchanged at 4.4%, while those for job-changers at 7.0% were the largest since August 2025. Wage data is not a major inflationary risk but is not signaling labor market weakness.
