US private payrolls miss expectations; cost pressures rising for businesses

WASHINGTON: US private payrolls increased less than expected in February amid job losses in manufacturing and construction, suggesting the labour market was struggling to regain speed despite the nation's improving public health picture.

Part of the labour market's problems appear to be rooted in a shortage of workers. Other data on Wednesday showed job growth in the services industry retreated last month, with businesses reporting they were "unable to fill vacant positions with qualified applicants" and "need more resources to meet demand."

The year-long COVID-19 pandemic is keeping some workers at home, fearful of accepting or returning to jobs that could expose them to the coronavirus. The data was published ahead of the government's closely watched employment report on Friday, and could temper expectations for an acceleration in job growth in February. The ADP's private payrolls report, however, has a poor track record predicting the private payrolls count in the government's more comprehensive employment report.

Private payrolls rose by 117,000 jobs last month after increasing 195,000 in January, the ADP National Employment Report showed. The report is jointly developed with Moody's Analytics. Economists polled by Reuters had forecast private payrolls would increase by 177,000 jobs in February.

Construction employment fell by 3,000 jobs and manufacturing payrolls decreased 14,000. Hiring in the services sector increased by 131,000 jobs, with the leisure and hospitality industry adding 26,000 positions. Harsh weather in some parts of the country was also likely a factor holding back gains.

In a separate report on Wednesday, the Institute for Supply Management (ISM) said its measure of services sector employment fell to a reading of 52.7 in February from 55.2 in January.

The lack of significant improvement in the labour market is also despite nearly $900 billion in additional pandemic relief provided by the government in late December, which boosted consumer spending and positioned the economy for faster growth in the first quarter.

Gross domestic product growth estimates for the first quarter have been raised to as high as a 10% annualized rate from as low as a 2.3% pace. The upgrades also reflect President Joe Biden's $1.9 trillion recovery plan, under consideration by Congress. The economy grew at a 4.1% rate in the fourth quarter.

According to a Reuters poll of economists, the government will likely report on Friday that nonfarm payrolls increased by 180,000 jobs in February after rising only 49,000 in January.

Hopes for a pick-up in hiring last month were supported by a survey last week showing consumers' perceptions of the labor market improved in February after deteriorating in January and December. In addition, a measure of manufacturing employment increased to a two-year high in February.

The retrenchment in services employment last month contributed to the ISM's broader non-manufacturing activity index declining to a nine-month low of 55.3 in February from a reading of 58.7 in January.