Hiring at US companies experienced a significant slowdown in February, reaching its lowest pace since July, primarily driven by job cuts in the service sector and regions affected by severe weather, Bloomberg reports.
Private-sector payrolls increased by a modest 77,000 in February, according to ADP Research, a sharp decrease from the revised 186,000 added in January. The figure fell short of all but one forecast in a Bloomberg survey, signaling a potential softening in the labor market.
This data aligns with other recent indicators suggesting a slowdown in hiring. Applications for unemployment benefits have reached their highest level this year, fueled by a growing number of job cuts at various companies, including federal contractors.
The release of the ADP report prompted a reaction in financial markets, with US Treasury yields and the dollar falling, while stock futures maintained their gains.
The majority of job losses were concentrated in the services sector, with significant declines in trade, transportation, utilities, education, and health care. In contrast, goods-producing employment saw an increase of 42,000, the largest gain since October 2022.
A regional analysis suggests that inclement weather played a role in the overall employment slowdown, with the South and West regions experiencing reductions in headcount. Furthermore, businesses with fewer than 20 employees were the only group to see job cuts.
A recent University of Michigan survey indicates growing consumer concern about a potential rise in unemployment over the next year. The Federal Reserve is closely monitoring the labor market for signs of deterioration as it attempts to balance supporting employment with its efforts to control inflation.
The ADP report, which is published in collaboration with the Stanford Digital Economy Lab, revealed that wage growth remained relatively stable. Workers who switched jobs saw an average pay increase of 6.7%, while those who stayed in their current roles experienced a 4.7% gain. The ADP findings are based on payroll data covering over 25 million US private-sector employees.
The official monthly employment report, which will include government positions, is scheduled for release on Friday and is expected to show a rebound in job growth for February.
