Greetings, and welcome to the ADP National Employment Report call. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded Wednesday, March second, two thousand and twenty-two. Now I will turn the conference over to Joanna DiNizio with ADP. Please go ahead. Good morning, and welcome to the February 2022 ADP National Employment Report media conference call. With us is Nela Richardson, Chief Economist at ADP. Nela will share her thoughts on the February findings, which is derived from ADP's actual data of those who are on a company's payroll and produced in collaboration with Moody's Analytics. Then she'll take as many of your questions as possible before our hard stop at 9 A.M. Eastern Time. Nela, please go ahead. Thanks, Joanna. Good morning, everybody. In February, private sector payrolls grew by 475,000 on net. Additionally, in a yearly process co-developed with Moody's, the February report includes scheduled annual revisions. These revisions led to a substantial upward increase of the January estimate to 509,000. This year, the jobs market is set to post strong gains even in the midst of ongoing labor shortages and now new developments in the Ukraine and Russia. We've seen jobless claims that have settled back to near the lowest level since the pandemic began, and it's reflective of how reluctant firms are to lay off workers in the current tight labor market environment. Omicron, which is now fading across most of the country, did not have as much of an economic impact as was expected or even seen in previous waves, but it may have had an effect of keeping some workers on the sidelines due to health concerns. In fact, the ADP Small Business Survey, which was conducted in December of last year, suggests that hiring remains the number one top challenge despite strong firm demand. That being said, job growth was less broad-based than previous months as goods producers added just 57,000 jobs in February. This was the weakest reading since August, while service providers added 417,000 job gains in February. Let's turn to the goods sector now. Construction payrolls rose by 26,000 in February. This was the weakest since August. House prices are still up nearly 20% over last year, surpassing growth from the peak of the housing market bubble. I'm very much aware of this timeframe as I was a housing economist at this time. What we're seeing now in terms of prices is reflective of that really strong growth. Yet the difference here is that inventory is now at all-time lows and home builders are still contending with high construction costs. That could challenge construction's labor development, especially in absence of immigration due to the pandemic. We've seen natural resource and mining add 2,000 jobs in February. That's slightly below the 4,000 monthly job gains over the last six months. Developments in the Ukraine and Russia have materially impacted oil prices, and we've seen that in the last couple of days, with oil now well over $100 a barrel after ending 2021 at just $75. This will, though, provide little long-term benefit to U.S. producers as prices will not likely remain elevated. Turning to manufacturing, which added 30,000 jobs in February. This was slightly off the 40,000 job pace over the last six months. While supply chain issues have improved as the Omicron wave faded, recent developments in Russia and the Ukraine have the potential to impose new challenges to global supply. Let's now turn to the service providers. These service providers rose jobs by 417,000 in February, bringing the average over the last three months to 496,000 in line with the 2021 average. Professional business services grew by 72,000 in February. That's down from the impressive gains at the end of 2021, but still in line with the average gains over the last year. We've seen a shift in the sector with high-paying professional service segments accounting for more than half of the gains in February for the first time in the last four months. Turning to the really important leisure hospitality sector, one that has been so subject to pandemic impact. The sector added a solid 170,000 jobs in February. The industry added more than 2 million over the course of 2021 and accounted for nearly 40% of all jobs added over the course of last year. The firms in this sector still, though, face ongoing challenges in finding workers to fill the relatively low-paid service jobs. Trade, transport, and utilities added 98,000 in February, bringing the average over the last three months to 113,000. This is well ahead of the average pace in 2021. I think there's some good news in this industry going forward. The ongoing return of air travel will provide a boost to the brick and mortar gains that retailers have had, and those gains that have actually outperformed expectations thus far as consumers have kept up their spending. Long-term gains in e-commerce spending will support long-term investment in growth in transportation and warehousing. Now, I think there's more to be said about the jobs market if you look at the size impact of job gains. We saw that firms with more than 1,000 workers added 528,000 jobs in February. This is the strongest gains since the earliest days of the pandemic recovery. In contrast, small companies actually shed jobs in February, and mid-sized companies remained relatively flat. We saw over the course of last year, job growth was much more consistent across firm size, and the outperformance of large companies is likely due to, in part, the struggle of firms to find and hire workers, particularly as there's still some ongoing health concerns tied to the pandemic. Small companies typically have smaller profit margins and cash reserves, making them less well-equipped to compete on wage and benefits for a limited pool of qualified workers. We think that overall, though, the jobs market is well-positioned to continue to make solid gains. Inflation is a near-term issue as wages continue to lag overall price increases, and we will continue to watch oil prices and their impact on headline inflation as an input to other goods. Though hiring demand remains strong, companies are still confronting labor supply challenges, higher wages, inflation, and the near-term prospects of higher rates and borrowing costs. Overall, we are optimistic but watchful. With that, Joanna, I'm now ready to take questions. Thank you, Nela. Operator, we are ready for questions. Thank you. If you'd like to register a question, please press the one followed by the four on your telephone. You'll hear a two-tone prompt to acknowledge your request. If your question has been answered and you'd like to withdraw your registration, please press the one followed by the three. Our first question comes from the line of Anneken Tappe. Please go ahead. Hi, good morning. Good morning. I was hoping, Nela, you could talk a little bit more about the revisions because they were obviously very significant at the very least for last month after the surprise decline that was worse than expected initially reported, and now we're obviously seeing this huge gain. I was hoping that you could give a little more insight in what the revisions were about. Maybe if you could also speak to the fact that we've talked about this a lot throughout the pandemic, how hard it is still to forecast where this market is gonna go this labor market is gonna go because there are so many forces at play at the same time. Sure. Let's take that question on the revisions. We saw that last month, the BLS revised and re-benchmarked their numbers for 2021. That led to a big pop in November, December in terms of job gains. We also, in keeping with our annual practice, re-benchmarked and revised according to the BLS numbers. We included their revisions for the last three months, and that fed our model for February. We also aligned our numbers with the QCEW, which is a consensus estimate of all the workers and firms in the United States. That's similar to what the BLS does and the BLS revisions. Now, turning to your question about measurement, during this pandemic period, we've seen that there has been numerous times when numbers have been revised, and it really points to trying to capture a moving target in terms of the seasonal adjustment. The impact of upwards of 20 million job losses in the spring of 2020, the sizable gains that we saw over the summer of 2020, and then the tremendous slowdown that we've seen at the end of that year, and then going into the year starts and stops along the way. All that has an impact on economic measurement and the ability to use standard statistical techniques to adjust for seasonal impact. You're seeing that in all data, not just labor market data. You'll see it in inflation data and other GDP data, other macro indicators that the tremendous upheaval and swings in the economy over the early days of the pandemic and through 2020 will have an impact on measurement and particularly seasonal adjustment. This is not just a labor market issue, it's a more macro issue. What it requires is that we focus on trend changes as opposed to one month or one data point. In doing that, to just round out these comments, if you look over the course of the year, both BLS and ADP are showing that job gains eclipsed 6 million. It was a strong year in terms of the recovery of jobs and the labor market looks positioned to have solid gains in 2022. Thank you. Sure. Thank you for the question. As a reminder to register for a question please press one-four. Our next question comes from the line of Lisa Price with Small Business Trends. Please go ahead. Hi. Good morning, Nela. Of course, I'm focusing on small businesses, and I'm wondering how much of that, you know, kind of surprising loss of 96,000 jobs in February. How much of that you think is. I read a report, another report somewhere that the applications to start new businesses are hitting record highs, including 5.4 million in 2021. Now we're in 2022. You had just said about looking at trends, and so I'm wondering if that entrepreneurship is in some way contributing to the loss of actual, salaried and hourly paid jobs in that field. I think what you're pointing to is still some dynamics that are changing post-pandemic. We're focused on the recovery, but structurally things have changed well, and you point to new business formation, and I agree. It looks like some workers are moving from traditional employment, setting up their own LLCs and providing labor services in a different way than they have in the past. In terms of the small firms in February, there's also this challenge because when we look at small businesses in our ADP Small Business Survey, which we conduct quarterly, what we see is that the demand is there. Small firms are ready and willing to hire. What has been tough is having the wages and benefits to compete with larger firms, especially those larger firms in their local market. Overall, there is a challenge in finding workers in this tight labor market environment. That challenge increasingly has become harder for small firms. We saw much more consistent gains earlier in the recovery. Now large firms are outperforming and outpacing because they have the ability to raise wages, to provide additional benefits, and even in this environment, probably more flexible in working arrangements than some smaller firms that may be service-oriented or in-person. There are a lot of things still going on in terms of trends in the labor market. Some of these are permanent. I think this move of small business formation has legs that extend beyond the pandemic. I guess I circle back to my remarks on being watchful, and looking for those trends that seem to be persistent and may impact small firm growth and the labor market dynamics overall. Thank you so much. Thanks for the question. As a reminder, if you wish to register for a question, please press one-four. I'm showing no further questions at this time. Thanks, operator, and thank you everyone for joining us this month. We look forward to having you back here for the next report, which will be released on March 30th. The call is now concluded. Thank you. That does conclude today's conference call. We thank you all for your participation and ask that you please disconnect your lines.