Summary: ADP payroll numbers increase in February; less than consensus figure; January rise revised up; figures up across firms of all sizes; gains entirely in services sector, goods sector contracts; report “will bias non-farm payroll expectations downwards.
The ADP National Employment Report is a monthly report which provides an estimate of US non-farm employment in the private sector. Since publishing of the report began in 2006, its employment figures have exhibited a high correlation with official non-farm payroll figures, although a large difference can arise in any individual month.
The latest ADP report indicated private sector employment increased by 117,000 in February, less than the 165,000 which had been generally expected. January’s rise was revised up by 21,000 to 195,000.
US Treasury yields moved noticeably higher on the day. By the close of business, the 2-year Treasury bond yield had gained 3bps to 0.14%, the 10-year yield had increased by 8bps to 1.48% while the 30-year yield finished 7bps higher at 2.27%.
In terms of US Fed policy, expectations of any change in the federal funds rate over the next 12 months remained soft. Federal funds futures contracts for March 2022 implied an effective federal funds rate of 0.095%, just above the current spot rate.
Employment numbers in net terms increased across businesses of all sizes, with medium-sized firms once again the main drivers of the month’s gain. Firms with less than 50 employees filled a net 32,000 positions, mid-sized firms (50-499 employees) gained 57,000 positions while large businesses (500 or more employees) accounted for 28,000 additional employees.