Job Market Worries: Why U.S. Businesses Are Hesitant to Hire More Workers

The rapid changes to regulations implemented by the Trump administration seem to be deterring U.S. businesses from recruiting new employees.

Hiring by private-sector companies in the United States declined precipitously last month, according to new statistics released Wednesday. This was significantly more than economists expected.

According to payroll giant ADP, employment in the private sector grew by an estimated 77,000 jobs in February. That represents a dramatic drop from the robust 186,000 employment growth observed in January and hardly half of the 142,500 net gain that FactSet estimates experts had expected.

“Policy uncertainty and a slowdown in consumer spending might have led to layoffs or a slowdown in hiring last month,” Nela Richardson, chief economist at ADP said in a statement. “Our data, combined with other recent indicators, suggests a hiring hesitancy among employers as they assess the economic climate ahead.”

Economic growth has been fueled in part by robust consumer spending supported by a healthy labor market. But in recent weeks, the all-powerful consumer was beginning to express some concern.

At a time when the Trump administration has implemented shock-and-awe policy measures, such as imposing hefty tariffs on America’s top three trading partners, threatening to deport large numbers of undocumented immigrants, and taking a symbolic chainsaw to the federal workforce, consumers’ faith in the economy is turning around.

Business uncertainty has grown as a result of the volatility, especially in areas like trade: Businesses polled by the Federal Reserve Bank of New York said they anticipate increasing costs and inflation in 2025, according to new data released Wednesday.

The service sector, specifically commerce, transportation, and utilities (-33,000), education and health services (-28,000), and information (-14,000), had the worst employment losses, according to ADP’s National Employment Report.

The survey found that the largest employment losses occurred in the West and South regions, as well as in the smallest enterprises (those with 19 or fewer employees).

For employees who remained with their current firm, pay increases were constant at 4.7%, while for those who moved jobs, they decreased little to 6.7% from 6.8%.

Although ADP’s statistics don’t always match those of the official federal jobs report, they are occasionally used as a stand-in for hiring activity in general.

Economists anticipate a net increase of roughly 160,000 jobs in the February jobs report, which is due out on Friday.