ADP's private sector jobs report beat analysts' expectations Wednesday, coming in at 214,000 new hires for February, compared with Bloomberg's consensus estimate of 185,000. January's figure was revised down 6% to 193,000. February 2015 saw 200,000 new hires. The report offers a preview for Friday's non-farm payrolls report from the Bureau of Labor Statistics, which may come in better than expected, based on Wednesday's surprise.
Small businesses (1-50 employees) hired 76,000 workers, as did large businesses (500+ employees), while medium-sized business (51-499 employees) hired 62,000. Services led the hiring spree, with 208,000, while the goods-producing sector hired 5,000.
Within services, trade, transportation and utilities accounted for 20,000 new hires, while financial activities saw 8,000 and professional and business services saw 59,000. Within the goods-producing sector, construction added 27,000 jobs, while manufacturing lost 9,000.
The Bottom Line
ADP's jobs report provides a preview of the more closely-watched Friday non-farm payrolls report from the BLS. The U.S. labor market has shown dramatic signs of recovery since the financial crisis. Unemployment is below 5%, which many economists consider to be full employment. Inflation has lagged behind the Federal Reserve's target of 2%, however, implying that there are still large numbers of discouraged workers who do not show up in employment reports. The persistent divergence between the services sector, which is prospering and accounts for around 80% of the economy, and struggling manufacturers is also a blemish on the recovery. Particularly given the current climate of market volatility, investors will continue to watch employment data closely.