Hiring surged in the US in January, but economists warn that the increase may be exaggerated (JUSTIN SULLIVAN)

Washington (AFP) – American companies hired at a stunning pace in January, adding the most jobs in five years, according to data Wednesday from payrolls firm ADP.

Private companies added 291,000 new hires last month — surpassing the consensus forecast in spectacular fashion — to post the biggest gain since December 2014, according to ADP’s monthly report.

Nearly all the increase was in the services sector, but there was a relatively healthy gain in manufacturing as well.

While the report is watched for signals on the critical government employment data due out Friday, economists warned that they expected the figure to be exaggerated as the data is frequently revised.

Mild weather in much of the US is cited as one factor in the blockbuster number.

“When winter doesn’t strike, the data can become weird,” economist Joel Naroff said, warning that, “If the better than expected economic numbers have been weather driven, we will pay for it when normal weather returns.”

Mark Zandi, chief economist of Moody’s Analytics, which helps produce the report, acknowledged that “mild winter weather provided a significant boost to the January employment gain.”

The leisure, hospitality and construction industries, which are sensitive to weather, saw an outsized increase in jobs, with the former gaining 96,000 — the biggest increase since at least early 2004.

The construction sector has had two strong months, adding 47,000 jobs in January, while manufacturing gained 10,000 jobs, reversing the decline of the same amount in December. Health and education also have continued to hire at a solid pace.

Ian Shepherdson of Pantheon Macroeconomics, who predicted that the data would be inflated, said, “We are confident, though, that the official data on Friday will be much less spectacular.”

And Zandi too indicates the hiring frenzy will cool.

“Abstracting from the vagaries of the data underlying job growth is close to 125,000 per month, which is consistent with low and stable unemployment,” he said.

Prior to the ADP data, economists expected the government to report a 155,000 gain in private employment, but Shepherdson said he has boosted his forecast to 200,000.

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.