ADP Employment Growth Strengthens in February; Earnings Gain Eases

Nonfarm private sector payrolls increased 242,000 during February (2.5% y/y) after rising 119,000 in January, revised from 106,000, and an unrevised 253,000 December gain. January’s increase had been the smallest in early two years. A 205,000 February increase was expected in the Action Economics Forecast Survey.

Growth in median annual pay for "job stayers" rose 7.2% y/y, but remained below a September high of 7.8% y/y. These gains compare to a low of 1.6% in March of 2021. The earnings increase was led by 10.1% y/y growth in leisure & hospitality earnings, down from 16.9% y/y growth in March 2022. Financial sector earnings rose a lessened 7.3% y/y. Factory sector pay rose a smaller 7.1% y/y while professional & business service sector earnings rose 6.5% y/y.

Small businesses hiring (1-49 employees) fell 61,000 (0.0% y/y), down for the sixth month in the last seven. Employment at firms with 50-499 employees rose 148,000 (5.1% y/y), about the same as in January. The three-month average increase eased to 191,000. Employment at large-sized firms rose 160,000 (3.3% y/y) last month after increasing roughly 50,000 during each of the prior two months.

By industry group, goods-producing employment rose 52,000 (1.2% y/y) after an 11,000 January gain. The increase was the largest in 12 months. Factory sector jobs rose 43,000 (2.2% y/y) after a 29,000 gain. It also was the largest rise in 12 months. Construction employment fell 16,000 (+0.1% y/y), off for the second straight month. Hiring in the natural resource & mining sector surged 25,000 (-1.3% y/y) following a 3,000 January increase.

Service-producing jobs rose 190,000 last month (2.8% y/y) following a 108,000 January increase. The gain was below most monthly increases during the last year. Leisure & hospitality employment led the gain with an 83,000 increase (7.5% y/y) after rising 68,000 in January. Financial activities employment rose 62,000 (1.0% y/y) after falling 11,000 in January. Education & health care sector employment improved 35,000 (3.1% y/y) after rising 20,000 in January. Information sector jobs edged 9,000 higher (2.2% y/y) after falling 2,000. Trade, transportation & utilities payrolls rose 3,000 (0.2% y/y) following declines in three of the prior four months. Offsetting these gains, professional & business services employment declined 36,000 (+2.8% y/y) after a 31,000 increase. It was the first decline since July 2020.

By Census region, employment in the West increased 128,000 (2.9% y/y) following a 45,000 January decline. In the South, the number of jobs rose 94,000 (2.2% y/y), about the same as in January. Employment in the Northeast improved 37,000 (4.0% y/y) following a 42,000 January gain. To the downside, jobs in the Midwest declined 12,000 (+1.5% y/y), the second decline in three months, as heavy snowfall tempered labor market activity.

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.