U.S. employers stepped up their pace of hiring in February, payroll firm ADP said Wednesday, in a further indication that more effort may be needed to cool the world’s biggest economy.
Private sector employment surged by 242,000 jobs in February, around double the revised 119,000 figure in January and significantly more than analysts expected, the latest ADP report said.
This follows a series of recent indicators showing that hiring remained strong, consumer spending resilient and inflation persistent — despite the Federal Reserve’s efforts to tame price increases.
“We’re seeing robust hiring, which is good for the economy and workers, but pay growth is still quite elevated,” said Nela Richardson, chief economist at ADP, in a statement.
Wage growth in February slowed to 7.2 percent compared with a year ago, the survey showed, while the figure for workers who changed jobs also eased to 14.3 percent.
“The modest slowdown in pay increases, on its own, is unlikely to drive down inflation rapidly in the near-term,” Richardson cautioned.
Since early last year, the US central bank has attempted to slow surging inflation with eight interest rate hikes, walking a fine line in an effort to ease demand without tipping the economy into a recession.
Fed Chair Jerome Powell warned on Tuesday that policymakers are prepared to step up rate hikes — and lift rates higher than previously anticipated — if needed to cool inflation and the robust jobs market.
The ADP report said Wednesday that “job gains are solid and wage growth remains elevated.”
The majority of job gains last month came about in the service-providing industry, in particular leisure and hospitality, as well as in financial activities.
ADP added that small establishments are “a particular area of weakness,” given that this segment has shed jobs every month since August 2022.
Analysts, however, caution against extrapolating too much given that the data can diverge from official numbers.
For now, the figures appear stronger than expectations for the private sector portion of payrolls in Friday’s government data release, said Rubeela Farooqi, chief US economist at High Frequency Economics.
“We expect payrolls to remain positive for now,” she added. “But the pace should slow as the Fed pushes rates further into restrictive territory.”
EYE ON WAGES
Policymakers have been keeping an eye on wage gains as companies competed to find and retain workers, concerned that this could lead to rising costs for services and make price increases more stubborn.