US private sector posts largest hiring in six years

Total private payrolls increased an eye-popping 298,000 in the month, beating the consensus forecast for a 180,000 rise. Photograph:( AFP )

AFP Washington, United States Mar 08, 2017, 05.02 PM (IST)

US private-sector hiring posted the biggest increase in nearly six years last month, while the goods-producing sector saw record job growth, payroll services firm ADP reported Wednesday.

The second straight month of very strong jobs data will play into President Donald Trump's focus on manufacturing jobs, which he has promised to bring back to America.

But if the strong gains continue, it could mean lending rates will rise faster than currently expected, as the US central bank closely monitors the so-far tame inflation threat.

Total private payrolls increased an eye-popping 298,000 in the month, beating the consensus forecast for a 180,000 rise, and outpacing the strong 261,000 increase in January, which was revised up from the initial figure.

It was the biggest increase in private employment since April 2011.

But the highlight of the data was the goods-producing industries which posted the biggest increase in the history of the report, going back to April 2002. The sector added 106,000 workers last month, while services firms increased 193,000. 

"February proved to be an incredibly strong month for employment with increases we have not seen in years," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.

The data, which is extracted from ADP payroll data, is frequently seen as a predictor of the Labor Department's monthly employment report, which is due out Friday. 

The consensus forecast is for an increase of 188,000 in total payrolls and 185,000 for private jobs, but economists may revise their estimates upward following the ADP report.

Trump has consistently repeated his campaign pledge to bring manufacturing jobs back to US shores, and has turned to Twitter frequently to pressure specific companies -- a tactic that has had some success.

ADP reported a gain of 32,000 manufacturing jobs, taking the sector to its highest level since January 2009.

In a tweet early Wednesday, prior to release of the ADP data, Trump touted a little-know Linkedin hiring report released Tuesday, showing jobs increases in January and February that were the "strongest consecutive months of hiring since August and September 2015."

Fed could hike faster 

The ADP report also is likely to increase confidence in markets that the Federal Reserve will raise interest rates next week, given the solid indications the economic recovery is picking up steam. 

But the Fed's policy-setting Federal Open Market Committee, which meets March 14-15, may start thinking about more increases that the two to three expected for the year, if tightening labor markets fuel fears of accelerating wages that could lead to more inflation.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the strong hiring "will push the  unemployment rate down further, forcing the Fed to tighten more  quickly than markets -- and policymakers -- currently expect.

He cautioned that the ADP report "is not a consistent reliable guide to the initial official private payroll number, but it probably would be unwise to ignore it altogether."

Mickey Levy of Berenberg Capital Markets, agreed the Fed will be under more pressure to prevent the economy from overheating.  

"The Fed will certainly acknowledge the strong job gains along with other data and soaring confidence," he said in a research note.  "If job gains of this magnitude continue and wages tilt up and inflation pressures build, the Fed will be forced to hike more than expected in 2017-2018."

Mark Zandi, chief economist of Moody's Analytics said in the ADP statement, the unseasonably mild winter weather "undoubtedly played a role" in the strong ADP numbers.

"But near record high job openings and record low layoffs underpin the entire job market," he said, noting strength in construction, mining and manufacturing.

Broken down by size, medium-sized business increased 122,000 and small businesses added 104,000. Large firms lagged with 72,000.