US private sector employers added 475,000 jobs in February (figure below), 100,000 more than consensus expected, ADP said Wednesday.
The range, from three-dozen economists, was 200,000 to 700,000.
ADP has been a poor indicator of NFP in the pandemic era, and the revision to January’s abysmal print was so large as to cast considerable doubt on the utility of the figures. February’s report incorporated annual revisions.
Recall that the original January ADP report showed employers shed 301,000 jobs. Wednesday’s revision added 810,000 to that figure, transforming a 301,000 headline job loss into a 509,000 job gain.
I’m sure the methodology behind the revisions offers a nominally plausible explanation for that, but I’m not inclined to delve too far into it given everything else dominating the market narrative.
Notably, small businesses shed nearly 100,000 positions. Large employers, by contrast, added 552,000 jobs. “Hiring remains robust but capped by reduced labor supply post-pandemic,” ADP chief economist Nela Richardson said, in a press release. “Last month large companies showed they are well-poised to compete with higher wages and benefit offerings, and posted the strongest reading since the early days of the pandemic recovery.”
In other words, big business can pay up for scarce workers in an environment of rapidly rising comp costs, but small businesses can’t, which is a problem because depending on how you define “small,” small businesses account for just under half of private sector employment in America.
February’s report was the first time small businesses shed jobs on net since the initial volatility around the first COVID wave (figure above).
“Small companies lost ground as they continue to struggle to keep pace with the wages and benefits needed to attract a limited pool of qualified workers,” Richardson went on to say.
As for the sector breakdown, leisure and hospitality added 170,000 positions in February, a decent showing. Again, revisions turned a January decline into a gain.
Ultimately, it was difficult to discern anything like a definitive takeaway. As BMO’s US rates team put it, “a solid read, but given the divergence between ADP and NFP (to say nothing of war in Ukraine) the broader market impact [is likely to be] minimal.”
