Mid-tier U.S. data presented a nuanced picture of the economy, with the services sector maintaining steady growth while private sector job creation slowed to a crawl in January, prompting mixed movements in the U.S. dollar across major currency pairs.
Key Takeaways
ADP National Employment Report:
- Private sector employment increased by just 22,000 jobs in January
- Annual pay growth held at 4.5% year-over-year
- Job creation for full-year 2025 totaled 398,000, down significantly from 771,000 in 2024
- Education and health services led with 74,000 new jobs
- Manufacturing continued its decline, shedding 8,000 jobs
- Professional and business services contracted by 57,000 positions
- Large establishments (500+ employees) cut 18,000 jobs
ISM Services PMI:
- Services PMI held at 53.8% for the second consecutive month, marking the 19th straight month of expansion
- New Orders Index declined to 53.1% (down 3.4 percentage points from December’s 56.5%)
- Employment Index edged down to 50.3% (from December’s 51.7%), expanding for the second consecutive month
- Prices Index climbed to 66.6% (up 1.5 percentage points), marking the 104th consecutive month of price increases
The modest 22,000 ADP job gain fell well short of consensus expectations at 46,000 and the previous 37,000 increase, reinforcing concerns about labor market softening. Markets interpreted this as potentially dovish for Federal Reserve policy, reducing expectations for sustained hawkish positioning.
Dr. Nela Richardson, chief economist at ADP, noted that “job creation took a step back in 2025,” highlighting a “continuous and dramatic slowdown” over the past three years, even as wage growth remained stable.
Link to official ADP Employment Change Report (January 2026)
The ISM Services data provided some counterbalance, with the headline PMI matching December’s reading and Business Activity showing acceleration. However, the combination of declining New Orders and elevated price pressures presented a stagflationary concern that complicated the dollar’s trajectory.
ISM Services Business Survey Committee Chair Steve Miller emphasized positive signs, stating that January marked “a second month in a row of all four subindexes being in expansion territory.” However, he cautioned that “the closely watched Prices Index continues to creep up,” now sitting 0.2 percentage points above its 12-month average of 66.4%.
Link to official ISM Services PMI (January 2026)
Respondents to the ISM survey also cited tariff uncertainty and geopolitical tensions as factors influencing their business decisions. One accommodation and food services respondent noted, “The uncertainty of U.S. tariff policies continues to affect our purchasing.”
Market Reactions
U.S. Dollar vs. Major Currencies: 5-min
Overlay of USD vs. Major Currencies Chart Faster with TradingView
The U.S. dollar, which had been edging slightly lower leading up to the ADP and ISM reports, exhibited mixed reactions following the simultaneous data releases at 8:15 AM ET and 10:00 AM ET respectively.
The weaker-than-expected ADP employment figure triggered a brief dip among some dollar pairs, notably against JPY (+0.28%) and CHF (+0.20%) in the minutes following the release. Losses against other counterparts, however, remained limited while dollar strength returned ahead of the ISM release.
Net positive underlying metrics from the services sector survey led to more pronounced rallies for USD, particularly against AUD (+0.53%) and NZD (+0.61%) which held on to their gains until the end of New York market hours. By session’s close, the dollar closed higher across the board, as markets likely judged that the steady services sector expansion and wage growth still reflected economic resilience.
Interested in fundamental analysis made for newbies and how to pair it up with technical analysis to find high-quality opportunities that may match your trading and risk management style? Check out our Premium membership for event trading guides, short-term strategies, weekly recaps and more!
BabyPips.com Annual Premium Members also get an exclusive 30% discount on the annual subscription for the first year on Tradezella–the top-rated journaling app! ($120 in savings)! Click here for more info!
Feed from Babypips.com