The U.S. economy added 214,000 private non-farm jobs in February, according to a monthly employment report released today by payroll-processing company ADP and its partner Moody’s Analytics. Of those gains, more than one-third came from businesses with fewer than 50 employees. The seasonally adjusted top-line number is a slight increase from January's downward-revised figure and shows the market closing in on total employment—typically considered as 4.5 percent to 5 percent unemployment—Moody’s chief economist Mark Zandi said in a conference call this morning. For perspective, the national unemployment rate, as measured by the U.S. Bureau of Labor Statistics (BLS), was 4.9 percent in January.
“It’s been … almost a decade since the last time we were at full employment,” Zandi says. “Everything seems to suggest that for the first time in 20 years we will be back to full employment [by this summer]. Everyone who wants a job will have a job.”
Economists use the ADP index to help set their projections for the monthly BLS report. Looking ahead to this Friday, when the BLS will release its own payroll numbers for February, Zandi projects that figure to surpass 200,000—up from January’s 193,000 payroll gains—and that the economy will sustain roughly that rate of growth for the next several months before slowing to around 150,000 monthly payroll gains later in the year. These figures all point to a strong economy with a tight labor market. The slowdown in payroll additions should trigger wage growth, which is projected to rise from the current monthly rate of 2.5 percent to 3.5 percent later this year, as employers compete among a shrinking labor pool. (This, of course, has ongoing implications for labor availability—or the lack thereof—in construction.)
Uncertainty in the form of sliding oil prices, cheap energy, and volatility in currency markets is finding equilibrium, giving businesses the confidence to invest in new labor.
Construction remains a key source of job growth, with 27,000 payroll additions in February—on par with the upward-revised 26,000 added in January and 32,000 in December. “Home sales, housing construction, [and] origination volumes are all pretty solid and people are people feeling really good about the spring selling season,” Zandi says. Market unrest has driven down mortgage rates, triggering a refinancing wave and supporting demand in the single-family market. Take with that the strong job-growth numbers overall, Zandi adds, and “everything indicates that housing will be just fine.”
Manufacturing faced a “mild recession” in February, reporting a net loss of 9,000 payroll positions, following a roughly break-even January and modest growth in the fourth quarter of 2015. The sector was bolstered by record-high vehicle sales and related production during the period.
Professional and business services, a category that includes architecture and engineering firms, added 59,000 jobs in February, compared to the downward-revised 38,000 in January and on par with the previous quarter.
The BLS is scheduled to release its February jobs report on Friday, which will provide more details about job growth in the architecture, engineering, and construction market.