US companies added 213,000 workers to payrolls this month, according to the ADP National Employment Report. Although the monthly increase is below December’s strong 263,000 gain, the latest number still reflect a healthy expansion for the labor market. The release goes a long way in dismissing concern that a new recession is imminent. Today’s report (and Monday’s encouraging data from the Chicago Fed National Activity Index for December) follows the cautious but upbeat analysis of the US business cycle published earlier this month.
“The labor market has continued its pattern of strong growth with little sign of a slowdown in sight,“ says Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “We saw significant growth in nearly all industries, with manufacturing adding the most jobs in more than four years.”
The year-over-year increase in ADP’s employment estimate ticked lower this month, slipping fractionally to a 1.94% rise – the slowest since September. Nonetheless, a labor market that’s expanding at close to 2% reflects a healthy trend and it implies that the US economy still enjoys a solid tailwind.
“The job market weathered the government shutdown well,” notes Mark Zandi, chief economist of Moody’s Analytics, which co-produces the data with ADP. “Despite the severe disruptions, businesses continued to add aggressively to their payrolls. As long as businesses hire strongly the economic expansion will continue on.”
Today’s results offer a degree of confidence for expecting that Friday’s official jobs report for January from the Labor Department will align with today’s ADP release. Yet Econoday.com’s consensus forecast sees the government’s estimate of private payrolls rising 160,000, sharply below December’s stellar 301,000 gain. But if today’s update is a clue, the case for an upside surprise on Friday is a reasonable guess.
In any case, Friday’s release deserves close attention for an update on the crucial one-year trend in private payrolls. For now, the healthy 2% annual pace is expected to hold steady in January for the government’s data, according to The Capital Spectator’s projection via the average forecast using nine models. The growth trend for payrolls is expected to ease in the months ahead, but unless the Labor Department’s numbers reveal otherwise on Friday the near-term outlook still looks encouraging.
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