Payroll processor ADP released a report on Wednesday showing private sector employment in the U.S. increased by much less than expected in the month of February.
ADP said private sector employment rose by 117,000 jobs in February after climbing by an upwardly revised 195,000 jobs in January.
Economists had expected employment to increase by 177,000 jobs compared to the addition of 174,000 jobs originally reported for the previous month.
Paul Ashworth, Chief U.S. Economist at Capital Economics said the slowdown in job growth is a "disappointment given that the drop-off in coronavirus case numbers and the resulting lifting of containment measures should be giving the economy a bigger shot in the arm."
The report showed employment in the service-providing sector increased by 131,000 jobs, reflecting notable job growth in trade/transportation/utilities and health care/social assistance.
Employment in leisure/hospitality edged up by 26,000 jobs, which Ashworth called "suspiciously low given the extent of the rebound in the high frequency data from Opentable on in-person dining."
Meanwhile, ADP said employment in the goods-producing sector dipped by 14,000 jobs amid decreases in both manufacturing and construction jobs.
The report also showed employment at mid-sized businesses rose by 57,000 jobs, while small and large businesses added 32,000 jobs and 28,000 jobs, respectively.
"The labor market continues to post a sluggish recovery across the board," said Nela Richardson, ADP's chief economist. "We're seeing large-sized companies increasingly feeling the effects of COVID-19, while job growth in the goods producing sector pauses."
She added "With the pandemic still in the driver's seat, the service sector remains well below its pre-pandemic levels; however, this sector is one that will likely benefit the most over time with reopenings and increased consumer confidence."
On Friday, the Labor Department is scheduled to release its more closely watched monthly employment report, which includes both public and private sector jobs.
Economists currently expect employment to increase by 180,000 jobs in February after rising by 49,000 jobs in January. The unemployment rate is expected to hold at 6.3 percent.
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