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 242,000 for the month, ahead of the Dow Jones estimate of 205,000 and well above the upward gain of 119,000 jobs from 106,000 in January.
Wage growth slowed slightly and those remaining in their jobs saw 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 watching jobs data closely for clues about where inflation is headed. Remarks on Tuesday by Fed Chairman Jerome Powell, who called the jobs market “extremely tight,” sparked a sell-off on Wall Street amid 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’re seeing robust hiring, which is good for the economy and good for workers, but wage growth is still quite high. The modest slowdown in wage growth by itself is unlikely to drive inflation down quickly in the near term.”
By sector, leisure and hospitality led job growth with 83,000 additions. Financial activities added 62,000, while manufacturing posted a robust gain of 43,000 as the industry benefited from a mild winter.
Other areas showing increases 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 fell by 16,000.
All of the job additions came from companies employing 50 or more employees. Small businesses saw a net loss of 61,000, most of which came at businesses with fewer than 20 employees.
The ADP report serves as a precursor to the more closely followed nonfarm payrolls report that the Labor Department releases on Friday.
Although ADP entered into a new partnership with Stanford University last year, the two numbers have 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.