Private Sector Job Growth Slows
Business + Economy

Private Sector Job Growth Slows

The pace of job creation by private employers slowed more than expected in January after a sharp gain the month before, a report by a payrolls processor showed on Wednesday.

The private sector added 170,000 jobs last month, the ADP National Employment Report showed, shy of economists' expectations for a gain of 185,000 jobs.

It was the smallest gain in three months and inline with economists' forecasts for private job gains in the more comprehensive labor market report on Friday.

ADP also revised down December's private payrolls to an increase of 292,000 from the previously reported 325,000. The report is jointly developed with Macroeconomic Advisers LLC.

"The previous two months (ADP) has been well above consensus. With this month, we had a bit of disappointment. The ADP (number) kind of says it's the right number for the Friday's payroll report," said John Canally, economist and investment strategist at LPL Financial in Boston.

U.S. stock index futures held on to gains immediately following the data.

Economists often refer to the ADP report to fine-tune their expectations for the payrolls numbers, though it is not always accurate in predicting the outcome.

The ADP figures have had a tendency to overshoot the government report lately. The ADP report has come in stronger than the private payrolls component of the nonfarm jobs report for three straight months, averaging a 62,000 overshoot in the fourth quarter of last year, according to Jonathan Basile, director of U.S. economics at Credit Suisse.

Friday's report is expected to show the economy created 150,000 jobs, and a gain in private payrolls of 170,000, according to Reuters data.

Despite the expected increase, prospects for a third round of quantitative easing from the Federal Reserve remain good as long as unemployment stays above 8 percent, Michael Woolfolk, a senior currency strategist at BNY Mellon, wrote in a note.

The unemployment rate is expected to hold steady at 8.5 percent.

(Reporting By Leah Schnurr, additional reporting by Richard Leong; Editing by Teodore d'Afflisio)