Private payroll growth disappointed in February, despite encouraging signs of economic growth, according to an ADP report on Wednesday.
The companies added just 117,000 positions in the month, well below the 225,000 forecasts of economists polled by Dow Jones.
The total also represented a sharp drop from the 195,000 upward revised jobs in January.
The ADP report “is a disappointment, given that the drop in coronavirus case numbers and the resulting survey of containment measures should give the economy a better chance,” said Paul Ashwoth, chief economist at Capital Economics for the United States.
The weak reading of the ADP occurs despite solid projections of economic growth in the first quarter. According to the Atlanta Federal Reserve’s GDPNow tracker, the U.S. is on track for a 10% gain to start 2021.
“The labor market continues to show a slow recovery in all areas,” said Nela Richardson, chief economist at ADP. “We are seeing large companies increasingly feeling the effects of COVID-19, while job growth in the goods production sector is halted.”
All net employment growth came from the services side.
Commerce, transport and utilities led the sectors last month, with the addition of 48,000 positions. Education and health services increased by 35,000, while the battered hospitality industry, which suffered the worst of the pandemic, generated just 26,000 jobs. The sector is 3.8 million positions below where it was a year ago, just before the worst of the Covid-19 crisis.
Professional and commercial services contributed 22,000 to the total.
Manufacturing lost 14,000 jobs in the month, while construction rolls declined by 3,000.
“With the pandemic still in the driver’s seat, the service sector remains well below its pre-pandemic levels; however, it is this sector that is likely to benefit most from the reopenings and increased consumer confidence,” said Richardson.
Companies with between 50 and 499 employees had the greatest growth, with 57,000 new jobs, while small companies added 32,000 and large companies contributed 28,000.
Although the numbers may differ widely, the ADP survey can sometimes provide clues to the most observed non-farm payroll report that the Department of Labor releases each month.
January produced just 49,000 non-farm jobs, according to the government, well below the ADP estimate, which is compiled with Moody’s Analytics. The February government report is expected to show a gain of 210,000, according to Dow Jones estimates.