Private wage growth disappointed in February despite otherwise encouraging signs of economic growth, according to a report by ADP on Wednesday.
Companies added just 117,000 jobs for the month, well below the 225,000 forecast by economists surveyed by Dow Jones.
The total also saw a sharp drop compared to the upward revised 195,000 jobs in January.
The ADP report ‘is a disappointment because the decline in the number of coronavirus cases and the consequent lifting of the controls should give the economy a greater chance in the arm,’ says Paul Ashwoth, chief economist at Capital Economics.
The weak ADP reading comes despite good forecasts for economic growth in the first quarter. According to the BNPNow tracker of the Atlanta Federal Reserve, the US is on track for a 10% profit to start in 2021.
“The labor market continues to deliver a sluggish recovery across the board,” said Nela Richardson, chief economist at ADP. “We are seeing large companies increasingly feel the effects of COVID-19, while job growth in the goods production sector stagnates.”
All the net growth of jobs comes from the services side.
Trade, transport and utilities led sectors last month with the addition of 48,000 jobs. Education and health services increased by 35,000, while the battered hospitality industry, which suffered the worst pandemic-related blow, added just 26,000 jobs. The sector declined by 3.8 million positions from where it stood a year ago, just before the worst of the Covid-19 crisis.
Professional and business services contributed 22,000 to the total.
Manufacturing lost 14,000 jobs for the month, while construction roles declined by 3,000.
“With the pandemic still in the driver’s seat, the services sector remains well below its pre-pandemic levels; however, this sector is likely to benefit most from reopening and increased consumer confidence over time,” Richardson said.
Businesses with between 50 and 499 employees experienced the largest growth, with 57,000 new jobs, while small businesses added 32,000 and large businesses contributed 28,000.
Although the figures may vary widely, the ADP survey can sometimes provide clues to the better-viewed non-farming payrolls that the Department of Labor publishes each month.
According to the government, January generated just 49,000 non-farming jobs, well below the ADP estimate compiled by Moody’s Analytics. The government’s February report is expected to show a profit of 210,000, according to Dow Jones estimates.