U.S. February ADP Employment - A stronger month after sharply underperforming payrolls in January
February’s ADP’s estimate of private sector employment of 63k is stronger than the market expected though in part offset to a downward revision to January to 11k from 22k. The bounce in ADP data looks like a correction from a weak January which sharply underperformed the non-farm payroll.
January’s ADP data is now even more sharply underperforming a 172k rise in private non-farm payrolls and we suspect February could see ADP data marginally outperforming the payroll, for which we expect a 35k rise overall and 50k in the private sector.
For the ADP report, this is the strongest increase since July 2025. This data and the stronger January non-farm payroll suggest some improvement in the labor market, with downside risks to February’s non-farm payroll led by weather which payrolls are more sensitive to then the ADP report.
February’s ADP gain was led by a 52k rise in education and health, a sector that has led most recent non-farm payroll gains and was particularly strong in January. Construction at 19k was also improved but may be vulnerable to weather in the non-farm payroll. Manufacturing fell by 5k despite recent signs of improvement in the sector. Business and professional, which was particularly weak in January’s ADP report, remained weak, falling by 30k.
Wage growth was unchanged at 4.5% yr/yr for job-stayers but for job-changers it slowed to 6.3% from 6.4%, consistent with a continued gradual moderation in wage growth.