A worker prepares a 155 mm artillery shell at the Scranton Army Ammunition Plant in Scranton, Pennsylvania, U.S., on February 1[ads1]6, 2023.
Brendan McDermid | Reuters
Businesses added jobs at a brisk pace in February as the U.S. labor market continued to hum, payroll services firm ADP reported Wednesday.
Private payrolls rose by 242,000 for the month, ahead of the Dow Jones estimate of 205,000 and well above the revised 119,000 job gain, from 106,000, in January.
Wage growth slowed slightly, and those who remained on the job saw an annual increase of 7.2%, down 0.1 percentage point from a month ago. Job changers had growth of 14.3%, compared to 14.9% in January.
The report comes with Federal Reserve officials watching jobs data closely for clues about where inflation is headed. Remarks on Tuesday by Fed Chairman Jerome Powell, who called the labor market “extremely tight”, sparked a sell-off on Wall Street amid expectations that the central bank could accelerate the pace of rate hikes.
“There is a trade-off in the labor market right now,” said ADP’s chief economist, Nela Richardson. “We’re seeing robust hiring, which is good for the economy and workers, but wage growth is still quite high. The modest decline in wage increases, alone, is unlikely to drive down inflation quickly in the near term.”
By sector, leisure and hospitality led job growth with 83,000 additions. Financial activities increased by 62,000 while manufacturing showed a solid gain of 43,000 as industry benefited from a mild winter.
Other areas showing increases include 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 declined by 16,000.
All of the job grants came from companies employing 50 or more workers. Small businesses had a net loss of 61,000, most of which occurred in businesses employing fewer than 20 people.
The ADP report serves as a precursor to the more closely followed nonfarm payrolls report that the Labor Department is scheduled to release on Friday.
Although ADP entered into a new partnership with Stanford University last year, the two counts still differ by large margins in some cases. For example, the Labor Department estimated that payrolls rose by 517,000 in January, more than four times what ADP reported.
Friday’s report is expected to show a gain of 225,000 in February, with the unemployment rate holding steady at 3.4%, according to Dow Jones estimates.