US DATA: ADP Payrolls Beat In February, But Underlying Details Don't Convince

Private payrolls rose by 63k in February, per the ADP Employment Report. This was the strongest initial reading since July 2025 and a beat vs the 50k expected, but its impact was offset by some mitigating factors that pointed to relatively subdued labor market conditions.

• The first was the downward revision to January's 22k rise (to 11k), which meant that the 3-month moving average came in at 38k which was exactly as expected (incorporating January pre-revision and Feb consensus 50k). However this also meant that despite the strong February figure, the 3-month average was the lowest since July 2025.
• The second was a lackluster composition of gains: while a 19k increase in construction payrolls was a positive sign cyclically, there was a 5k drop in manufacturing and 30k in professional/business services. This left the notoriously acyclical education and health services sector driving the overall gain in payrolls, at 58k, the strongest since August 2024. Services jobs (ex-education/health) rose 5k which was better than the -39k prior but left the 6-month pace at just -22k.
• Finally, the wage dynamics were soft. ADP Chief Economist Nela Richardson points out in the press release that "with hiring concentrated in only a few sectors, our data shows no widespread pay benefit from changing jobs. In fact, the pay premium for switching employers hit a record low in February." Job-stayer pay rose 4.5% Y/Y, with the aforementioned job changes up 6.3%.
• In better news, small-firm (1-19 employees) saw a 58k rise in payrolls, the best since January 2024 in something of a bellwether category for underlying labor demand.
• Overall the headline figure was very close to the February BLS private payrolls expectation of 65k (which would be down from 172k in January) so shouldn't shift expectations very much. Indeed, the gap in January between BLS and ADP was very wide so it's likely ADP would have been faded this month either way.