ADP: Employment Growth Improves in February; Pay Gains Slow Further

The ADP National Employment Report indicated that nonfarm private sector payrolls rose 140,000 during February after advancing 111,000 in January, revised from 107,000. December’s 158,000 increase was unrevised. February’s 1.8% y/y gain compares to 1.9% last year and 3.1% in 2022. Growth slowed further to 1.3% (AR) during the last three months. A 150,000 rise in February employment had been expected in the Action Economics Forecast Survey.

Small business hiring (less than 50 employees) increased 13,000 (1.5% y/y) last month after rising 22,000 in January. Employment at medium-sized firms (50-499,000 employees) rose 69,000 (2.1% y/y) after a 66,000 January gain, well below a 220,000 June high. Large business hiring (500+ employees) rose 61,000 (1.6% y/y) during February following a 23,000 January rise.

By industry group, goods-producing employment rose 30,000 last month (1.7% y/y) after a 38,000 January rise. The number of construction sector jobs rose 28,000 (4.4% y/y) following a 32,000 January increase. Hiring in the manufacturing sector edged 6,000 higher (-1.0% y/y) last month after easing 2,000 in January. Natural resource & mining sector employment fell 4,000 (+9.7% y/y) after an 8,000 January increase.

Service-producing jobs rose 110,000 in February (1.8% y/y) following a 73,000 January rise. Leisure & hospitality employment improved 41,000 (5.0% y/y) after a 34,000 gain. Trade, transportation & utilities jobs rose 24,000 (0.7% y/y) after rising 15,000 in January. Education & health service employment grew 11,000 (3.1% y/y) after an 18,000 January improvement. The number of financial sector jobs rose 17,000 (1.3% y/y) after increasing 11,000 in January. Professional & business service employment edged 5,000 higher (0.1% y/y) following a 4,000 decline. Continuing to restrain the overall service sector gain, information sector employment fell 2,000 (-1.0% y/y) after falling 14,000 in January.

Growth in median annual pay for "job stayers" eased to 5.1% y/y in February from 5.3% y/y in January, remaining well below a September 2022 high of 7.8% y/y. The earnings slowdown continued to be led by the leisure & hospitality sector, where a 5.9% y/y pay gain in February compared to a high of 16.9% y/y growth in March 2022. Construction sector pay grew a reduced 5.5% y/y and remained below a February 2023 high of 7.1% y/y. Education & health services pay rose a lessened 5.7% y/y, down from a 7.3% y/y high in October 2022. Financial sector earnings rose 5.5% y/y, below a 7.8% y/y high in November of 2022, while information sector pay rose a lessened 4.8% y/y and remained below the 8.0% y/y peak in June 2022. Factory sector earnings rose a reduced 4.8% y/y versus a high of 7.8% y/y in September 2022. Pay increases for “job changers” improved to 7.6% y/y last month, but remained below the 16.4% y/y peak in June 2022.

By Census region, employment in the West improved 42,000 (1.4% y/y) after rising 26,000 in January. The number of jobs in the Midwest increased 39,000 (1.9% y/y) after rising 12,000 in January. In the South, employment rose 37,000 last month (1.6% y/y) after a 23,000 January increase. Employment in the Northeast improved 20,000 last month (2.4% y/y) after increasing 38,000 in January.

The ADP National Employment Report and Pay Insights data can be found in Haver's USECON database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's AS1REPNA database.

Semiannual Monetary Policy Report to the Congress by Fed Chair Jerome H. Powell is available here.