Private employers added back 117,000 jobs in February, missing expectations: ADP

U.S. private employers added back fewer jobs than expected in February, disappointing economists who had anticipated that the early stages of the vaccine rollout and falling COVID-19 cases would allow hiring to pick up strongly during the month.

Private payrolls in the U.S. grew by 117,000 in February, ADP said in its closely watched monthly report Wednesday morning. This followed an upwardly revised gain of 195,000 payrolls in January, which had in turn reversed a drop of about 75,000 payrolls in December. Consensus economists expected a rise of 205,000 private payrolls for February, according to Bloomberg consensus data. 

“The modest 117,000 gain in the ADP measure of private payrolls for February, down from an upwardly revised 195,000 increase the month before, is a disappointment given that the drop-off in coronavirus case numbers and the resulting lifting of containment measures should be giving the economy a bigger shot in the arm,” Paul Ashworth, chief U.S. economist for Capital Economics, wrote in a note Wednesday morning. 

Service-providing businesses made more headway in recovering jobs last month. Across the private services sector, payrolls rose by 131,000 in February, led by a gain of 48,000 in trade, transportation and utilities industries. Education and health services payrolls followed with a rise of 35,000 payrolls, and leisure and hospitality jobs rose by 26,000. Within services, only information payrolls fell in February, though financial activities jobs registered no change.

Manufacturing and constructions jobs in the goods-producing sector dipped, however, as winter weather likely weighed in part on employment in these industries. Private construction jobs fell by 3,000 in February, while manufacturing payrolls fell by 14,000. 

U.S. labor market data has been choppy over the past several weeks, as harsh winter weather in states like Texas weighed on hiring but also frustrated data collection for jobs report surveys, resulting in data that may understate the extent of the ongoing weakness in the labor market. Other recent reports showed signs of this noise: Weekly initial jobless claims spiked at the beginning of February to nearly 850,000 before falling precipitously to 730,000 last week.

NEW YORK, NY - FEBRUARY 05: People walk through a Manhattan neighborhood on February 05, 2021 in New York City. New government jobs numbers released on Friday showed that while 49,000 jobs were added in January, the United States economy is still down nearly 10 million jobs lost since before the pandemic. (Photo by Spencer Platt/Getty Images)

NEW YORK, NY – FEBRUARY 05: People walk through a Manhattan neighborhood on February 05, 2021 in New York City. (Photo by Spencer Platt/Getty Images)

But temporary factors aside, many economists say that the labor market remains on track for a more sustained recovery later this year, aided by the vaccine-enabled economic reopening.

“Certainly this was disappointing. Job growth has been softer in late 2020 and early 2021 than we would like coming out of the recession that we experienced last year,” Gus Faucher, PNC chief economist, told Yahoo Finance Live Wednesday morning. “That being said, I do expect to see much strong job growth later this year.”

“We are getting vaccine distribution, we’ve got this big stimulus bill that’s going through Congress, low interest rates from the Fed, better weather in the spring that will allow more outdoor activity,” he added. “So I think the job market is a little soft right now. But I would expect it’s going to see much better improvement as we head into the spring and summer this year.”

On Friday, the U.S. Labor Department will report the results of the “official” monthly jobs report for February. The ADP report has typically been an unreliable indicator of the results in the government report due to differences in survey methodology. In January, for instance, ADP showed a private payroll gain of 174,000 before revisions in its initial print, while the Labor Department showed private payrolls rose by a disappointing 6,000. With the ADP report, only individuals on an active payroll are counted as employed, while the Labor Department considers any individual that received a paycheck during the mid-month survey week for the report as employed.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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