WASHINGTON (Reuters) -U.S. private payrolls increased more than expected in February, pointing to continued labor market strength.
Private employment increased by 242,000 jobs last month, the ADP National Employment report showed on Wednesday. Data for January was revised higher to show 119,000 jobs added instead of 106,000 as previously reported. Economists polled by Reuters had forecast private employment increasing 200,000.
Though unreliable, the ADP report was consistent with labor market tightness. Federal Reserve Chair Jerome Powell told lawmakers on Tuesday that the U.S. central bank would likely need to raise interest rates more than expected and opened the door to a half-point rate hike this month to combat inflation, following a recent raft of strong economic data.
Job growth was robust in January, with the unemployment rate falling to a more than 53-1/2-year low of 3.4%. Consumer spending rebounded strongly and inflation picked up in January.
The ADP report showed hiring continuing to be concentrated in the services sector, which added 190,000 jobs last month, most of them in the leisure and hospitality industry.
There were also gains in the financial activities, education and health services, information, and trade, transportation and utilities industries. But professional and business services shed 36,000 jobs.
The goods-producing sector added 52,000 jobs, with manufacturing creating 43,000 positions. But construction payrolls decreased by 16,000 jobs.
The ADP report, jointly developed with the Stanford Digital Economy Lab, was published ahead of the Labor Department’s Bureau of Labor Statistics’ more comprehensive and closely watched employment report for February on Friday.
It has been a poor gauge in forecasting private payrolls in the BLS employment report. The ADP initially reported 106,000 private jobs were created in January, a fraction of the 443,000 surge in private payrolls estimated by the BLS.
“The ADP claimed that the January weakness was due to unseasonably severe winter weather in California during the survey week, but the strength of the official payroll figures strongly implied instead that the unseasonably mild winter in the Northeast was the dominant factor,” said Andrew Hunter, deputy chief U.S. economist at Capital Economics.
According to a Reuters survey of economists, private payrolls likely increased by 213,000 jobs in February. Total nonfarm payrolls are forecast rising by 203,000 jobs last month after surging 517,000 in January.
“We don’t think we should view the ADP report as a particularly reliable signal regarding Friday’s BLS report,” said Daniel Silver, an economist at JPMorgan in New York.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)
