ADP: U.S. Private Payrolls Rose Just 77K in February, a 7-Month Low

On the positive side, leisure and hospitality led job gains with 41,000 new positions, while professional and business services added 27,000. The financial sector and construction industry each contributed 25,000 jobs, and manufacturing posted an 18,000-job gain, contradicting the ISM manufacturing survey that indicated a hiring slowdown.

Larger Firms Dominate Hiring While Small Businesses Struggle

Hiring was concentrated in larger firms, with companies employing 500 or more workers adding 37,000 jobs, while small businesses with fewer than 50 employees reported a net loss of 12,000 jobs. This divergence suggests that smaller firms may be more vulnerable to economic pressures, including policy uncertainty and slowing consumer spending.

Market Reaction and Economic Implications

Stock futures trimmed earlier gains following the ADP report, while Treasury yields showed mixed movement. ADP Chief Economist Nela Richardson noted that hiring hesitancy may be setting in, driven by policy uncertainty and softening consumer demand. Meanwhile, annual pay growth remained steady at 4.7%, reinforcing expectations of persistent wage inflation.

Outlook Ahead of BLS Report

The weaker ADP report raises questions about the upcoming BLS nonfarm payrolls release, which economists expect to show an increase of 160,000 jobs and an unchanged 4.0% unemployment rate. If Friday’s data confirms a labor market slowdown, it could influence Federal Reserve policy expectations and broader market sentiment. Traders should monitor employment data closely, as weaker job growth may heighten recession fears and impact rate-cut projections.

More Information in our Economic Calendar.