Businesses added jobs at a brisk pace in February as the US job market continued to hum, payroll services firm ADP reported on Wednesday.
Private payrolls rose 242,000 for the month, above the Dow Jones estimate of 205,000 and well above the upwardly revised 119,000 job gain from January’s 106,000.
Wage growth slowed slightly, with those who stayed in their jobs posting a 7.2% annual increase, down 0.1 percentage point from the previous month. Job changers saw a 14.3% growth compared to 14.9% in January.
The report comes with Federal Reserve officials closely monitoring employment data for clues as to where inflation is headed. Remarks by Fed Chair Jerome Powell on Tuesday, who described the labor market as “extremely tight”, sparked a sell-off on Wall Street on expectations that the central bank could accelerate the pace of its rate hikes.
“There is a compromise in the labor market right now,” said ADP chief economist Nela Richardson. “We are seeing robust hiring, which is good for the economy and for workers, but wage growth is still quite strong. The slight deceleration in wage increases alone is unlikely to push inflation down quickly in the near term.”
A worker packs cast iron cookware at the Lodge Manufacturing Co. factory in South Pittsburg, Tennessee on Monday, March 7, 2022.
Luke Sharret | Bloomberg | Getty Images
By sector, leisure and hospitality led to job gains with 83,000 additions. Financial activities added 62k while manufacturing posted a robust 43k gain as the industry benefited from a mild winter.
Other areas of gain were Education and Health Services (35,000), the Other Services category (34,000), and Natural Resources and Mining (25,000). Professional and business services lost 36,000 jobs while construction fell by 16,000.
All new jobs came from companies with 50 or more employees. Small businesses posted a net loss of 61,000, most of them in operations with fewer than 20 employees.
The ADP report serves as a precursor to the more closely monitored nonfarm payrolls report that the Labor Department is due to release on Friday.
Although ADP entered into a new partnership with Stanford University last year, the two counts still differ significantly in some cases. For example, the Labor Department estimated that the workforce increased by 517,000 in January, more than four times what the ADP reported.
“The rebound in personal payrolls after a disappointing January adds uncertainty to the debate over when higher interest rates will translate into demonstrably slower hiring,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley’s Global Investment Office. “Friday’s Nonfarm Payroll Report will provide additional clarity for investors, but all signs point to the labor market remaining resilient ahead of the Fed’s next decision.”
Friday’s report is expected to show growth from 225k in February, with the jobless rate held steady at 3.4%, according to Dow Jones estimates.