U.S. private payrolls rose slightly less than expected in February, while wages for workers remaining in their jobs increased at the slowest pace in 2-1/2 years, consistent with a cooling labor market.
Private payrolls increased by 140,000 jobs last month after rising by an upwardly revised 111,000 in January, the ADP Employment report showed on Wednesday.
Economists polled by Reuters had forecast private employment increasing by 150,000 jobs last month compared to the previously reported 107,000 in January.
The increase in private payrolls was led by trade, transportation and utilities, which added 24,000 jobs. Construction employment increased by 28,000 positions, likely boosted by mild weather. Financial activities payrolls rose by 17,000 jobs, while manufacturing hired 6,000 more workers.
But professional and business services shed jobs as did the natural resources and mining sector. Wages for workers staying in their jobs increased 5.1% in the 12 months through February. That was the smallest annual gain since August 2021 and followed a 5.3% rise in January.
The ADP report, jointly developed with the Stanford Digital Economy Lab, was published ahead of the release on Friday of the Labor Department's more comprehensive and closely watched employment report for February.
It has tended to grossly overstate the slowdown in the labor market compared to the official employment data, and no impact on the near term monetary policy outlook.
Financial markets expect the Federal Reserve to start cutting interest rates this year, with the timing depending on progress in lowering inflation towards it 2% target.
Fed Chair Jerome Powell in prepared testimony to lawmakers on Wednesday said the U.S. central bank's policy setting committee "does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent."
Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25%-5.50% range.
The dollar was trading lower against a basket of currencies. U.S. Treasury prices rose.
According to a Reuters survey of economists, the Labor Department's Bureau of Labor Statistics is expected to report that private payrolls rose by 160,000 jobs last month after increasing 317,000 in January.
Total nonfarm payrolls are estimated to have increased by 200,000 jobs after rising 353,000 in the prior month. The unemployment rate is forecast unchanged at 3.7% and annual wage growth slowing to 4.4% from 4.5% in January.
