Hiring in the US private sector showed modest momentum in February, but a key perk of the tight labor market—the big pay bump from switching jobs—appears to be fading.
According to the latest ADP National Employment Report, private employers added 63,000 jobs in February, marking the strongest monthly gain since July 2025. The report, produced by ADP Research in collaboration with the Stanford Digital Economy Lab, draws on anonymized payroll data from more than 26 million private-sector workers, offering one of the most detailed snapshots of employment trends in the US economy.
Yet beneath the headline job growth lies a shifting labor market dynamic: while pay growth for workers who stay in their roles remains steady, the wage advantage for changing employers has shrunk to a historic low.
Hiring Rebounds—but Growth Is Uneven
February’s 63,000-job increase represents a rebound after January’s numbers were revised downward from 22,000 to 11,000 jobs added. The gains were driven largely by two sectors: construction and education and health services, which together accounted for the majority of new jobs.
Education and health services led the pack with 58,000 jobs added, while construction contributed 19,000 new positions. These sectors have remained relatively resilient amid broader economic uncertainty and shifting labor demand.
Other industries were less robust. Professional and business services shed 30,000 jobs, the largest decline among sectors, while manufacturing lost 5,000 jobs. Trade, transportation, and utilities also dipped slightly with a loss of 1,000 jobs.
The mixed results suggest hiring remains concentrated in a handful of sectors rather than broadly distributed across the economy.
“Hiring picked up in February and pay gains remain solid, especially for job-stayers,” said Dr. Nela Richardson, Chief Economist at ADP. “But with hiring concentrated in only a few sectors, our data shows no widespread pay benefit from changing jobs.”
The Job-Switch Pay Advantage Is Shrinking
One of the defining features of the post-pandemic labor market was the significant pay premium workers could earn by switching employers. That advantage is now narrowing.
In February, job-changers saw median annual pay growth of 6.3%, while job-stayers experienced 4.5% year-over-year pay growth. Although workers who switch jobs still earn higher raises on average, the gap between the two groups has tightened significantly.
According to ADP’s analysis, the pay premium for switching employers hit a record low in February, signaling that companies may be pulling back on aggressive recruitment offers as labor market conditions stabilize.
For HR leaders and talent strategists, the shift could have implications for retention and hiring strategies. During the peak of labor shortages, employees often leveraged outside offers for substantial salary increases. With that premium shrinking, organizations may face less wage pressure from external hiring competition.
Small Businesses Lead Hiring
Breaking the numbers down by company size reveals another important trend: small businesses drove nearly all of February’s job gains.
Companies with 1 to 19 employees added 58,000 jobs, while those with 20 to 49 workers added another 2,000. Together, small establishments accounted for roughly 60,000 of the 63,000 total jobs created.
By contrast, mid-sized companies cut 7,000 jobs, while large employers with more than 500 workers added 10,000 positions.
The data highlights the outsized role small businesses continue to play in employment growth. It also suggests that larger organizations may still be exercising caution around hiring after the workforce expansions of recent years.
Regional Trends: The South Leads Growth
Regionally, the South recorded the strongest hiring gains, adding 37,000 jobs in February. The West followed with 19,000 new jobs, while the Northeast added 11,000.
The Midwest was the only region to experience job losses, shedding 4,000 positions overall.
Within the South, the West South Central region—covering states such as Texas and Oklahoma—accounted for the largest share of growth, adding 26,000 jobs.
These regional patterns reflect ongoing migration trends and economic expansion in the southern United States, where population growth and business investment have continued to fuel job creation.
Pay Growth Holds Steady Across Industries
Despite the evolving hiring landscape, pay growth for workers who remain in their jobs held steady at 4.5% year over year in February.
Some sectors saw stronger wage gains than others. Among job-stayers:
-
Financial activities recorded the highest median pay growth at 5.2%
-
Manufacturing followed with 4.9%
-
Construction saw 4.7% growth
-
Leisure and hospitality reported 4.6% increases
Meanwhile, information sector employees saw the slowest wage growth at 4.0%.
Firm size also played a role in pay increases. Workers at large companies with more than 500 employees saw median pay growth of 4.9%, compared with 4.7–4.8% at mid-sized firms and as low as 2.6% at the smallest businesses.
The disparity highlights the financial advantage larger organizations often have when competing for talent and managing compensation.
What the Data Means for HR and Talent Strategy
For HR leaders, the February ADP report offers a snapshot of a labor market that is stabilizing—but not stagnating.
Hiring continues, though at a moderate pace, and wage growth remains relatively healthy for workers who stay with their employers. At the same time, the diminishing pay premium for job-switchers suggests that the intense talent wars of the past few years may be cooling.
That shift could provide employers with more breathing room in compensation planning, particularly as companies focus on balancing wage increases with profitability pressures.
At the same time, sector-specific labor shortages—especially in healthcare, education, and construction—are likely to keep competition for skilled workers high in certain fields.
The data ultimately underscores a broader transition in the labor market: from rapid post-pandemic expansion toward a more balanced, slower-growth environment.
The next ADP National Employment Report is scheduled for release on April 1, 2026, offering another key early indicator of where hiring and wages are headed.
Join thousands of HR leaders who rely on HRTechEdge for the latest in workforce technology, AI-driven HR solutions, and strategic insights
