Income and Wage Inequality

New February data from payroll processor ADP and the Bank of America Institute indicate the U.S. labor market is stabilizing after a weak 2025, but most of the hiring is concentrated in a few sectors and pay gains are lagging inflation for many workers. ADP estimates private employers added 63,000 jobs in February, up from just 11,000 in January, with education and health services providing 58,000 of those positions and construction another 19,000 while most other industries were flat. Bank of America’s anonymized deposit data show payroll receipts up 1.3% year‑over‑year in February versus 0.8% in January, suggesting hiring momentum is improving heading into the government’s official jobs report. At the same time, wage growth is heavily skewed: higher‑income workers saw pay rise 4.2% over the past year, compared with just 1.2% for middle‑income and 0.6% for lower‑income workers, the widest gap in the bank’s data series, and ADP finds the pay premium for switching jobs has shrunk to a record low. Small firms with fewer than 20 employees drove most of last month’s job gains but only delivered 2.6% annual pay growth, implying many of the new positions do not provide the kind of real wage increases seen earlier in the recovery. Economists warn that geopolitical shocks, including the new Iran war and Trump’s tariff uncertainty, could make hiring choppy again later in 2026 even if current private‑sector indicators look stronger.