U.S. private payrolls miss expectations in February
U.S. private payrolls increased less than expected in February amid job losses in manufacturing and construction, suggesting the labor market was struggling to regain speed despite the nation’s improving public health picture.
Private payrolls rose by 117,000 jobs last month, the ADP National Employment Report showed on Wednesday. Data for January was revised up to show 195,000 jobs added instead of the initially reported 174,000.
“This 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,” said Paul Ashworth, chief economist at Capital Economics in Toronto.
Economists polled by Reuters had forecast private payrolls would increase by 177,000 jobs in February.
The goods-producing industry shed 14,000 jobs, with employment in construction falling 3,000. Manufacturing payrolls decreased by 14,000 jobs. Hiring in the services sector increased by 131,000. The leisure and hospitality industry added 26,000 jobs.
U.S. stock index futures pared gains on the data. The dollar was trading higher against a basket of currencies. U.S. Treasury prices were lower.
The ADP report is jointly developed with Moody’s Analytics. It has a very poor track record predicting the private payrolls count in the government’s more comprehensive, and closely watched, employment report because of methodology differences. The ADP report’s initial 174,000 private payrolls tally for January way overshot the Labor Department’s total of only 6,000.
“It remains difficult to use the ADP data as a signal for forecasting the Labor Department employment figures,” said Daniel Silver, an economist at JPMorgan in New York.
Nevertheless, the report is still followed for clues on the labor market’s health.
The labor market has been slow to regain traction even as some restrictions on services businesses have been rolled back amid a decline in new COVID-19 infections and hospitalizations.
The number of Americans filing initial claims for weekly state unemployment benefits remains way above its 665,000 peak during the 2007-09 Great Recession. At least 19 million people are collecting unemployment checks.
The lack of significant improvement in the labor market is also despite nearly $900 billion in additional pandemic relief provided by the government in late December, which boosted consumer spending and positioned the economy for faster growth in the first quarter.
First-quarter gross domestic product growth estimates have been raised to as high as a 10% annualized rate from as low as a 2.3% pace. The economy grew at a 4.1% rate in the fourth quarter.
“Historically, employment lags GDP by a quarter or so,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania. “We are expecting substantial job growth in the not-too-distant future.”
According to a Reuters poll of economists, the government will likely report on Friday that nonfarm payrolls increased by 180,000 jobs in February after rising only 49,000 in January.
Hopes for a pick-up in hiring were supported by a survey last week showing consumers’ perceptions of the labor market improved in February after deteriorating in January and December. In addition, a measure of manufacturing employment increased to a two-year high in February.
The economy has recovered 12.3 million of the 22.2 million jobs lost during the pandemic. Employment is not expected to return to its pre-pandemic level before 2024.
Source: Reuters (Reporting By Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)