U.S. February ADP Employment - Cause for concern but not a reliable payroll signal
ADP’s February estimate of private sector employment growth of 77k is well below expectations and a break from what had been a stable and solid trend. ADP is not a reliable guide to payrolls so we will not revise our 210k payroll call (190k in the more comparable private sector). Still, this is private sector data, not including the shrinking government, and risks of a slowdown are growing.
ADP details are mixed with construction with a 26k rise and manufacturing at 18k surprisingly strong. Services saw leisure and hospitality strong at 41k but weakens in trade transport and utilities, down 33k, and the usually strong education and health, down by 28k.
We see growing risks that the erratic policies of the Trump administration will do real economic damage, though February seemed a little too soon for that to appear. Bad weather could be a factor but if so, we note that payrolls tend to be more weather-sensitive than ADP data. Thus, this report is a cause for concern, but the unreliability of ADP data as a payroll guide makes us reluctant to change our payroll call.
