Job market surge: What's behind the February boom?

According to a survey from ADP, February private payrolls grew by 298,000 jobs, far beyond economists' expectations for the month.

First Look

The US jobs market has seen a surge over the past month, with businesses adding the most jobs in three years, according to the ADP National Employment Report, a private survey.

The report, released Wednesday, said that private payrolls grew by 298,000 jobs in February. Economists had predicted a gain of only 190,000. The report comes ahead of a more comprehensive survey by the US Labor Department coming on Friday.

"February proved to be an incredibly strong month for employment with increases we have not seen in years," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.

Leading the pack in February hiring was construction, which saw a 66,000-job increase – the most in 11 years. The boom was likely at least partially because of an unseasonably warm winter, since construction jobs usually shut down in freezing weather or snowy conditions. Also seeing an increase: manufacturing, with 32,000 new jobs added last month, a five-year high for that sector.

Part of the uptick is likely because of an optimistic atmosphere for businesses who stand to benefit from President Trump's promised tax cuts and deregulation. But while job growth is heating up, continuing weak productivity in the US economy will make it difficult for Mr. Trump to deliver on his promise to increase annual economic growth of 4 percent. The economy has yet to achieve even 3 percent annual growth since the end of the Great Recession.

Job growth – particularly in US manufacturing – is a key talking point for Trump, who is opposed to multilateral free-trade agreements like the Trans-Pacific Partnership and NAFTA. As The Christian Science Monitor's Patrik Jonsson and Simon Montlake reported in August of last year:

Free trade has resulted in a vast number of US manufacturing operations moving offshore. It has caused the loss of hundreds of thousands of jobs and hit certain communities, like Shelby, [N.C.], particularly hard. It has helped hold down the incomes of low-wage workers, and engendered a sense of angst among working-class Americans that has been overlooked by much of the political establishment. 

Yet free trade has not been universally villainous. American consumers have saved millions of dollars by buying foreign electronics, cars, and couches for less than if they had been made domestically. The pacts have led to the rise of many higher-end manufacturing operations here. Free trade may have helped some American companies survive when they otherwise wouldn’t have: They were able to compete in the new global environment by moving manufacturing plants to low-wage countries and keeping better-paying administrative, marketing, and other operations here.

Perhaps most significant, many of the jobs that have been lost in US manufacturing in the past 10 years were not the result of malevolent free-trade deals at all. They were caused by the inexorable rise of automation, even though that fact provides little solace to workers shorn of their paychecks.

Obstacles such as automation could make it difficult to create stable economic growth in US manufacturing going forward. But for now, the news is good, with the number of people seeking unemployment benefits at a 44-year low, and existing home sales rebounding to a 10-year high in January.

ADP, a payroll software company, only tracks private businesses, and its number often differ from Labor Department data. But changes in the methodology for ADP surveys has led to more accurate hiring reports that have matched up more closely to government data in recent months. In January, ADP was off by only 9,000 jobs, and only off by 8,000 in December. 

Even with this margin of error in mind, these large numbers could indicate that this year could see the start of significant hiring increase over last year's smaller gains. In 2016, the US gained an average of 185,000 new jobs per month.

This article contains material from the Associated Press and Reuters.