(Updates with economist’s comment in third paragraph.)
Feb. 1 (Bloomberg) -- Companies added 170,000 workers in January, reflecting job gains in services and at small businesses, according to a private report based on payrolls.
The increase was less than forecast and followed a revised 292,000 rise the prior month that was less than previously reported, the report from the Roseland, New Jersey-based ADP Employer Services showed today. The median estimate in a Bloomberg News survey of economists called for an advance of 182,000.
“The job market continues to grow at a moderate pace,” Jonathan Basile, a senior economist at Credit Suisse in New York, said before the report. “We’re on a gradually improving path for the labor market.”
More hiring is needed to spur consumer spending, which accounts for about 70 percent of the world’s largest economy. A Labor Department report in two days may show payrolls last month rose by 145,000 and the unemployment rate held at 8.5 percent, economists in a Bloomberg survey projected.
The projections for the change ADP employment ranged from 145,000 to 300,000, based on the estimates of 40 economists surveyed by Bloomberg.
The slowdown in hiring from the prior month may be explained by the so-called purge effect. Workers, regardless of when they are dismissed or quit, sometimes remain on company records until December, when businesses update, or purge, their figures with ADP.
The paycheck processor estimates this change when adjusting its data for seasonal variations and, because there were fewer firings at the end of 2011 than in previous years, ADP may have found it more difficult to formulate a projection.
“Employment grew in all the major sectors of the economy,” Joel Prakken, senior managing director at Macroeconomic Advisers LLC in St. Louis, which produces the data with ADP, said in a statement. “Other indicators suggest some firming of labor market conditions as well.”
ADP’s initial figures for December showed a 325,000 gain, while the Labor Department’s data a day later registered an increase of 212,000 in private payrolls for the month.
Goods-producing industries, which include manufacturers and construction companies, climbed by 18,000 workers, today’s ADP figures showed. Employment in factories added 10,000 jobs.
Service providers took on 152,000 workers.
Companies employing more than 499 workers added 3,000 jobs. Medium-sized businesses, with 50 to 499 employees, added 72,000 workers and small companies increased payrolls by 95,000, ADP said.
Concern about the high number of jobless Americans is one reason why the Federal Reserve last week said it would keep its benchmark lending rate near zero “at least” until late 2014 from a prior target of mid-2013.
“While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated,” Fed policy makers said after their meeting.
The Labor Department’s report in two days may show private payrolls rose by 165,000 in January, according to the Bloomberg survey median. Overall hiring, which includes government jobs, may have slowed to 145,000 after rising 200,000 in December.
The ADP report is based on data from about 344,000 businesses with more than 21 million workers on payrolls. Macroeconomic Advisers LLC in St. Louis produces the data with ADP.
--With assistance from Chris Middleton in Washington. Editor: Vince Golle, Carlos Torres
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