Private sector employers added 212,000 jobs in February, according to payroll giant ADP, but job gains were slightly weaker than in recent months, possibly because of the winter weather.
Small businesses added 94,000 jobs in February, down slightly from 97,000 in January. That total included 39,000 jobs in businesses with between one and 19 employees and 55,000 in businesses with between 20 and 49 employees.
Midsize businesses with between 50 and 499 employees added 63,000 jobs in February, down from 106,000 in January. Large businesses added 56,000 jobs, up from 47,000 in January. That total included 18,000 at businesses with between 500 and 999 employees, up from 16,000 in January, and 38,000 at businesses with 1,000 employees or more, up from 30,000 in January.
"While February’s job gains came in slightly lower than recent months, the trend of solid growth above 200,000 jobs per month continued,” said ADP president and CEO Carlos Rodriguez in a statement. “What is also encouraging is that job gains are broad-based across all key industries.”
The bulk of the job gains came in the service industry, which added 181,000 jobs last month, but that was down from 206,000 in January. The goods-producing sector added 31,000 jobs in February, down from 45,000 in January.
The construction industry added 31,000 jobs, the same number as last month. Meanwhile, manufacturing added 3,000 jobs in February, well below January’s 15,000.
The professional and business services sector, which includes accounting and tax preparation along with other services, contributed 34,000 jobs in February, but that was a drop-off from January’s 49,000. The combined trade, transportation and utilities sector grew by 31,000 in February, a sharp decline from January’s 50,000.
The 20,000 new jobs added in financial activities in February represented an increase from January’s 15,000 and marks the largest gain in that sector since March 2006. In addition, 29,000 franchise jobs were added in February, up slightly from 26,000 in January.
“The ADP gain for the month of February was on the soft side,” said Mark Zandi, chief economist at Moody’s Analytics, which compiles the monthly employment report with ADP. “But I think that belies the strength in the labor market.”
He pointed out that the overall trend over the past year has been approximately 250,000 jobs added per month, for a total of about 3 million added last year.
“That’s roughly what we got in 2014, and it feels like we’re on track to get at least that in 2015,” said Zandi during a conference call with reporters Wednesday. “All the labor market statistics look pretty good.”
He noted that there has been some weakening recently in the resource and mining sector related to the impact of the collapse in oil prices, but the declines have been in the thousands of jobs, as opposed to tens of thousands.
Weather has also had an impact on the job numbers, particularly in the Northeast.
“I do think February may have been affected by the weather,” said Zandi. “Obviously it’s always cold in February, but it was particularly bad in the Northeast and obviously around Boston. That is affecting the economic data broadly. For example, vehicle sales for the month of February were on the soft side, and it was apparent that a lot of that was related to very weak sales in the Northeast, and again that was probably related to the weather.”
Another recent development is the surge in the number of job openings.
“The number of openings rose to over 5 million in the month of December,” said Zandi. “That’s a new record high in that data, which goes back into the early 2000s. That’s up quite substantively over the last six to nine months. If you go back to mid-2014, there were roughly 4 million job openings. That’s a rather substantive pickup and an encouraging sign.”
He is also seeing a pickup in the rate of people leaving their jobs voluntarily. “Although the quit rate—the number of quits as a percent of the labor force—isn’t back to the levels that prevailed prior to the recession, we’re closing in on that pretty fast,” said Zandi. “I think in the next few months, we’ll be right there. That’s also a very encouraging sign and development.”
Zandi is also encouraged by a pickup in wage growth, most dramatically evidenced by Walmart’s announcement that it is raising the minimum wages of workers.
“My takeaway from all of this is that we’re on the leading edge of a meaningful acceleration in wage growth, and that will become more evident in the statistical data as we make our way into the spring and summer,” said Zandi. “So despite the softish February job gain of 212,000, I think the labor market is in very good shape, and the prospects are that it will continue to do well, at least for the foreseeable future. It’s going to take a lot to derail the momentum that currently exists in the labor market.”
He noted that the average pay increase for someone switching jobs is almost 15 percent, and the biggest pay increases among the people switching jobs are for younger workers, millennials and those who have been on the job for roughly two years.
“The other thing that seems to be happening is that those millennials that got hired in at a low wage are now catching up,” said Zandi. “Employers, because of the tightening labor market, are increasingly required to raise wages more aggressively. Otherwise they’re not going to hold on to these workers. They increasingly desperately need them because of the inexorable retirement of the Boomer generation. This is a process that has recently begun and it’s only going to intensify. In my view, our biggest problem three or four years down the road isn’t going to be unemployment or underemployment. It’s going to be a very significant labor shortage. We’re going to have a tough time finding workers in most industries in most parts of the country, and I think we’re just starting to see that in the data.”
