Private employers added 63,000 jobs in February, showing modest improvement in hiring compared with the previous month, according to the latest employment report from ADP.

The gain exceeded economists’ expectations of about 48,000 new jobs. January’s job growth was also revised significantly lower, with payrolls now estimated to have increased by just 11,000 positions.

While February’s increase came in above forecasts, hiring remained concentrated in only a few industries, suggesting the labor market is expanding unevenly across sectors.

Hiring Concentrated in a Few Industries

Most of February’s job growth came from two sectors.

Education and health services added 58,000 positions, continuing to serve as one of the main drivers of employment gains in recent months. Construction also showed strong growth, adding 19,000 jobs during the month.

Several other industries reported weaker results.

Professional and business services lost about 30,000 jobs, while manufacturing employment declined by roughly 5,000 positions. The trade, transportation, and utilities sector also saw a small decrease of around 1,000 jobs.

Outside of a gain of about 11,000 positions in information services, job creation across other industries remained largely unchanged.

Wage Growth Remains Steady

The report also showed that wage growth remained relatively stable.

Employees who stayed in their current positions saw average pay increases of about 4.5 percent compared with the previous year. Meanwhile, workers who changed jobs experienced wage growth of approximately 6.3 percent.

However, the difference between the two groups narrowed slightly. The wage advantage for switching jobs fell to its lowest level since ADP began tracking the measure.

Nela Richardson, chief economist at ADP, said hiring has improved but remains limited to a small number of sectors.

She noted that while wage gains remain strong for workers who stay in their roles, changing jobs is currently delivering fewer financial advantages than in previous years.

Small Businesses Lead Job Growth

Another notable shift in February’s report was the role of smaller companies in hiring.

Businesses with fewer than 50 employees accounted for most of the new jobs, adding roughly 60,000 positions during the month.

Large companies with 500 or more workers added about 10,000 jobs, while mid-sized businesses recorded a decline of around 7,000 positions.

This trend suggests that smaller employers are currently driving much of the labor market’s growth.

Broader Labor Market Trends

Overall job growth has slowed over the past year as the labor market gradually returns to more typical conditions following the surge in hiring that followed the COVID-19 pandemic.

Companies have been somewhat cautious about expanding payrolls, partly due to economic uncertainty and higher interest rates.

However, layoffs have also remained relatively low, which has helped keep unemployment from rising sharply.

Treasury Secretary Scott Bessent said in a television interview that growth in construction jobs reflects a broader wave of productivity improvements driven by technology.

He expressed confidence that the labor market will remain strong throughout the year.

Attention Turns to Government Jobs Report

The ADP data arrives ahead of the government’s official employment report scheduled for release later this week by the Bureau of Labor Statistics.

Economists expect that report to show the U.S. economy added roughly 50,000 jobs in February. The unemployment rate is projected to remain at about 4.3 percent.

Investors will also watch the report closely for clues about future interest rate decisions by the Federal Reserve.

Traders currently expect the central bank’s next rate cut to occur no earlier than July, according to data from CME Group.