Private companies added 63,000 jobs in February, January revised to just 11,000 additions: ADP
Speakers
Becky Quick — Anchor, CNBC
— CNBC Squawk Box host
Summary
- ADP Private Payrolls rose by 63,000 in February, beating estimates of 48,000. January was revised down significantly to just 11,000 additions.
- Small businesses (1-19 employees) were the primary driver, creating 58,000 of the 63,000 jobs, while medium-sized firms lost jobs.
- The labor market is described as "inert" and "frozen," with the lowest pay premium for job switchers on record (0.8%), leading to historically low turnover.
- Sector divergence is stark: Construction and Healthcare are leading growth, while Manufacturing and Professional Services are lagging.
Trade Ideas
Richardson explicitly states that "Construction... led the growth" and was the primary driver "on the good side" along with healthcare. Hiring is a leading indicator of economic activity and confidence. If construction firms are aggressively adding headcount in a "frozen" labor market, it signals robust pipeline demand for housing and infrastructure projects despite interest rate headwinds. LONG homebuilders and construction ETFs as they are the clear outliers in positive momentum. A sudden spike in rates could freeze the underlying housing market regardless of current hiring.
Nela Richardson
Chief Economist, ADP
Richardson calls Health Care the "new stalwart," noting that "most of those gains have been coming from health and education." In a low-growth, low-turnover economic environment, capital flows to sectors with inelastic demand. Healthcare's consistent hiring proves it is immune to the broader slowdown affecting cyclical industries. LONG Healthcare providers and services as a defensive play in a slowing economy. Regulatory changes or government reimbursement rate cuts.
Nela Richardson
Chief Economist, ADP
Richardson identifies the "biggest laggards" as "Professional and Business Services and Manufacturing." Job losses or stagnation in manufacturing are a direct signal of industrial contraction. When factories stop hiring or start firing, it indicates a drop in orders and production activity. AVOID the industrial sector until payroll data shows a bottoming process. An unexpected rebound in global demand or manufacturing PMIs could reverse this trend quickly.
Nela Richardson
Chief Economist, ADP
"Small businesses... created 58,000 of those job gains" (out of 63,000 total). Richardson notes small firms are benefiting from lower wage growth (2.6%) and an ability to hire talent that isn't moving to larger firms. The Russell 2000 (Small Caps) is often correlated with the health of the domestic small business economy. If small businesses are the *only* engine of job growth and are managing to keep wage costs down, their margins may improve relative to larger peers who are stagnant. LONG Small Caps as they demonstrate unique resilience and cost discipline in this specific payroll print. Small caps are highly sensitive to interest rates; if the "strong" jobs data keeps the Fed hawkish, IWM could suffer despite the hiring activity.
