February Jobs Report Shows Hiring Slowdown Despite Rising Up Vacancies in Key Sectors

The labor market is sending mixed signals. While the stock market digested fresh quarterly earnings and employment data on Wednesday, February 4th, a curious disconnect emerged: corporate job openings remain up in certain industries even as actual hiring stumbled. The ADP report revealed that private-sector payrolls expanded by just 22,000 in January—less than half of what economists had anticipated. Yet this snapshot of employment struggles contrasts sharply with persistent job openings, particularly in healthcare, financial services, and construction, painting a picture of a market where up vacancies exist alongside weaker hiring momentum.

The market’s immediate reaction reflected this complexity. Pre-market trading showed the Russell 2000 gaining 12 points while the tech-heavy Nasdaq retreated 66 points, the Dow advanced 142 points, and the S&P 500 rose 10 points—a telling divergence that underscores investor uncertainty about where growth will actually materialize.

Private Payroll Growth Falls Short; Services Sector Drives Modest Gains

Automated Data Processing’s monthly employment report landed with disappointing news for labor market optimists. January additions came to merely 22,000 new positions—a sharp drop from the downwardly revised 37,000 reported in December. This represents the first consecutive months of private-sector job growth since spring 2025, but the magnitude suggests momentum is fragile.

The composition of hiring tells an important story. Service-sector employment accounted for nearly all gains with 21,000 new roles, while goods-producing industries added just 1,000 positions. Within services, healthcare led the charge with 74,000 new positions, followed by 14,000 in financial services and 9,000 in construction. These up vacancies in healthcare reflect ongoing demand in aging demographics and medical services expansion.

However, troubling signs emerged elsewhere. Professional and Business Services cut 57,000 jobs—a substantial retrenchment—while manufacturing has posted zero months of positive ADP job growth since early 2024. This divergence between growing opportunities in some sectors and shrinking employment in others explains why up vacancies coexist with hiring weakness.

ADP Chief Economist Nela Richardson offered a candid assessment during a morning media appearance: “Hiring has been following the consumer, not technology.” This observation cuts to the heart of a broader disconnect. Despite the AI investment boom that has energized stock markets over recent years, the private-sector labor market hasn’t seen corresponding job creation. Data-center construction may eventually drive employment gains, but evidence remains thin. The concerning longer-term scenario—that artificial intelligence will displace workers across industries—remains speculative.

Adding to concerns about employment quality, ADP released an important “true-up” adjustment to its methodology. The revised figures show 212,000 fewer private-sector hires occurred throughout 2025 than previously reported. This recalibration means the year saw just 398,000 total private-sector job additions, down sharply from 771,000 in 2024. For investors tracking labor-market health, this downward revision is a critical data point—even if it’s unwelcome news.

The partial government shutdown is now delaying Friday’s non-farm payroll report from the U.S. Bureau of Labor Statistics. Markets had been expecting 60,000 new jobs in that report, with unemployment holding at 4.4%.

Pharmaceutical and Energy Stocks Lift on Strong Quarterly Results

Q4 earnings provided some offsetting optimism. A slate of major pharmaceutical companies delivered results that exceeded expectations, starting with Eli Lilly & Co., which posted earnings of $7.54 per share—a 7.9% beat versus estimates—on revenues of $19.29 billion, also topping projections by 7.9%. The company’s strength in diabetes and weight-loss medications (Zepbound and Mounjaro) signaled robust forward momentum in high-growth therapeutic areas.

AbbVie reported earnings of $2.71 per share versus the $2.66 consensus, a narrow beat that failed to impress investors; shares declined 3% despite the positive surprise. Novartis posted $2.03 per share, beating expectations by four cents, with shares responding positively by rising 1.6%. Both companies received a Zacks Rank 3 rating (Hold), reflecting cautious positioning from analysts.

Continuing its strong performance, Phillips 66 clobbered earnings expectations this morning with $2.47 per share versus $2.11 anticipated—and a stunning reversal from a loss of $0.15 per share in the year-ago quarter. The energy refiner’s shares gained 1.3% on the encouraging results.

The Broader Implication: Employment Gaps and Market Direction

The divergence between Q4 corporate earnings strength and private-sector hiring weakness raises a fundamental question: are businesses prioritizing profitability and automation over employment growth? While up vacancies persist in healthcare, construction, and financial services, the overall jobs market remains constrained. This employment-opportunities gap suggests that rapid productivity gains—possibly technology-driven—are allowing companies to expand earnings without proportional workforce expansion.

For investors, today’s data reinforces a complex reality: the stock market can thrive on corporate profitability even as the labor market struggles, and job openings can remain elevated even as overall hiring slows. Navigating this environment requires distinguishing between sectors where up vacancies reflect genuine growth (healthcare, construction) versus those where positions go unfilled due to skills mismatches or hiring discipline.