A worker packages cast iron cookware at the Lodge Manufacturing Company factory on Monday, March 7, 2022, in South Pittsburgh, Tennessee.
Luke Sharrett | Bloomberg | Getty Images
Payroll services firm ADP reported on Wednesday that companies added jobs at a faster pace in February as the US labor market rebounded.
Private payrolls increased by 242,000 for the month, ahead of and well above the Dow Jones estimate of 205,000. Gain of 119,000 jobs revised upward from 106,000 in January,
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Wage growth declined slightly, with those remaining in their jobs seeing a 7.2% annual increase, down 0.1 percentage point from a month ago. Job changers saw an increase of 14.3% compared to 14.9% in January.
The report coincides with Federal Reserve officials closely watching jobs data for clues on the direction of inflation. Remarks from the Fed Chairman Tuesday Jerome PowellThose who called the jobs market “extremely tight” triggered a sell-off on Wall Street amid hopes the central bank could speed up the pace of its interest rate hikes.
“There is a settlement in the labor market right now,” said Nella Richardson, ADP’s chief economist. “We are seeing strong hiring, which is good for the economy and workers, but wage growth is still fairly high. A modest slowdown in wage growth, by itself, is unlikely to reduce inflation sharply in the near term.”
By sector, leisure and hospitality led job growth with an additional 83,000 jobs. Financial activities added 62,000 while manufacturing showed a strong gain of 43,000 as industry benefited from a mild winter.
Other sectors showing growth included 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 was down 16,000.
All the jobs came from companies employing 50 or more workers. Small businesses saw a net loss of 61,000, most of which occurred at establishments employing fewer than 20 people.
The ADP report serves as a precursor to the more closely followed nonfarm payrolls report, which 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 a large margin in some cases. For example, the Department of Labor estimates Payrolls rose by 517,000 in Januarymore than four times that of ADP.
“The jump in private payrolls after a disappointing January adds uncertainty to the debate about when higher rates of hiring will taper off,” said Mike Lowengart, head of model portfolio construction at Morgan Stanley’s Global Investment Office. “Friday’s nonfarm payrolls report will provide additional clarity to investors, but all signs point to labor market resilience ahead of the Fed’s next decision.”
Friday’s report is expected to show an increase of 225,000 in February, with the unemployment rate holding steady at 3.4%, according to Dow Jones estimates.