ADP: U.S. companies added 198,000 jobs in February

March 6, 2013

The U.S. economy is creating jobs at a faster pace than economists had predicted, according to one private forecaster.


New figures from ADP suggest that the economy added 198,000 private-sector jobs in February, above analyst expectations. What's more, ADP estimated that January saw 215,000 jobs added, or 22,000 more than it had previously counted.

If those numbers hold up, it's evidence that "despite the ongoing fiscal uncertainty and the payroll tax hike, the recovery is picking up momentum," wrote Paul Ashworth of Capital Economics. He added that "after a worrying slowdown in the middle of last year, labour market conditions have improved markedly."

So why should we listen to ADP, a private payroll processing firm, rather than just wait for the government's jobs report, due out this Friday? For starters, as we've discussed before, ADP often tracks fairly closely with the final estimate on private-sector jobs from the Bureau of Labor Statistics:

Note that ADP is trying to predict the final revisions to the monthly government statistics on private-sector jobs, rather than the initial first-pass estimates. An example: Last month, the Bureau of Labor Statistics estimated that we added 166,000 jobs in January. ADP is reporting that 215,000 jobs were added. Essentially, ADP is betting that BLS will revise its January numbers up in the months ahead.

This is the fifth ADP report since the firm changed its methodology back in October. So far, notes Bill McBride of Calculated Risk, "it appears the new methodology is better, but it is still too early for a statistical analysis."

There is, however, one big caveat here: ADP is only looking at private-sector jobs. It won't capture any drop-off in government employment due to budget cuts. For that, we still have to rely on the BLS reports.

Also, as always, it's worth considering the broader context: Adding 200,000 jobs per month is a healthy development, but it's still a relatively modest pace given the deep hole that the labor market is in. At this pace, according to the Hamilton Project's jobs calculator, the United States won't return to full employment until 2020 or so.

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