A worker prepares a 155mm artillery shell at the Scranton Army Ammunition Plant in Scranton, Pennsylvania, U.S., February 16, 2023.
Brendan McDermid | Reuters
Companies added jobs at a rapid pace in February as the U.S. job market continued to hum, payroll firm ADP reported Wednesday.
Private payrolls rose 242,000 this month, surpassing the Dow Jones estimate of 205,000 and well above the upwardly revised 119,000 new jobs, from 106,000 in January.
Wage growth slowed slightly, with those keeping their jobs seeing an annual increase of 7.2%, down 0.1 percentage point from a month ago. Job changers saw growth of 14.3%, compared to 14.9% in January.
The report comes with Federal Reserve officials closely watching jobs data for clues about where inflation is headed. Remarks Tuesday from Fed Chairman Jerome Powell, who called the job market “extremely tight,” triggered a sell-off on Wall Street in expectations that the central bank could accelerate the pace of its rate hikes.
“There is a trade-off in the labor market right now,” said ADP chief economist Nela Richardson. “We are seeing robust hiring, which is good for the economy and workers, but wage growth is still quite high. The modest slowdown in wage increases alone is unlikely to bring inflation down any time soon.”
By sector, leisure and hospitality led to growth with 83,000 new jobs. Financial activities added 62,000, while manufacturing showed a strong gain of 43,000 as the industry benefited from a mild winter.
Other areas that showed increases included education and health care (35,000), the “other services” category (34,000), and natural resources and mining (25,000). 36,000 jobs were lost in professional and business services, while 16,000 jobs were lost in the construction sector.
All new jobs came from companies with 50 or more employees. Small businesses saw a net loss of 61,000, most of them at establishments employing fewer than 20 people.
The ADP report serves as a precursor to the more closely followed report on nonfarm payrolls that the Labor Department will release Friday.
Although ADP entered into a new partnership with Stanford University last year, the two counts still differed 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 growth of 225,000 in February, with the unemployment rate holding steady at 3.4%, according to Dow Jones estimates.