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Private payrolls growth well short of expectations for February, ADP says

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Private payroll growth disappointed in February despite otherwise encouraging signs of economic growth, according to a report Wednesday from ADP.

Companies added just 117,000 positions for the month, well below the 225,000 forecast from economists surveyed by Dow Jones.

The total also represented a sharp decline from the upward revised 195,000 jobs in January.

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The ADP report “is a disappointment given that the drop-off in coronavirus case numbers and the resulting lifting of containment measures should be giving the economy a bigger shot in the arm,” said Paul Ashworth, chief U.S. economist at Capital Economics.

The weak ADP reading comes despite solid projections for 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 post a sluggish recovery across the board,” said Nela Richardson, chief economist at ADP. “We’re seeing large-sized companies increasingly feeling the effects of COVID-19, while job growth in the goods producing sector pauses.”

All of the net job growth came from the services side.

Trade, transportation and utilities led sectors last month with the addition of 48,000 positions. Education and health services increased 35,000, while the battered hospitality industry, which took the worst of the pandemic-related hit, added just 26,000 jobs. The sector is down 3.8 million positions from where it stood a year ago, just before the worst of the Covid-19 crisis hit.

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Professional and business services contributed 22,000 to the total.

Manufacturing lost 14,000 jobs for the month while construction rolls decreased by 3,000.

“With the pandemic still in the driver’s seat, the service sector remains well below its pre-pandemic levels; however, this sector is one that will likely benefit the most over time with reopenings and increased consumer confidence,” Richardson said.

Companies with between 50 and 499 employees saw the greatest growth, with 57,000 new jobs, while small businesses added 32,000 and large firms contributed 28,000.

Though the figures can differ widely, the ADP survey sometimes can provide clues to the more closely watched nonfarm payrolls report that the Labor Department releases each month.

January produced just 49,000 nonfarm 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.

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