The pace of hiring at US companies picked up last month, according to the ADP Employment Report. Private payrolls increased by 257,000 in December in seasonally adjusted terms—beating the consensus forecast by a wide margin and delivering the strongest monthly gain in a year for this series. The surprisingly good news provides some relief after several days of discouraging economic updates.
“Strong job growth shows no signs of abating,” says Mark Zandi, chief economist of Moody’s Analytics, which produces the data in collaboration with ADP. “The only industry shedding jobs is energy. If this pace of job growth is sustained, which seems likely, the economy will be back to full employment by mid-year.”
ADP’s estimate implies that Friday’s official numbers on payrolls from Washington will deliver a round of upbeat news as well. The consensus forecast published by Econoday.com before today’s release projected that the Labor Department will report a rise of 193,000 for private-sector employment in December. Today’s figures from ADP suggest that Friday’s estimate should be raised.
Crunching the numbers by way of a simple linear regression model certainly puts a positive spin on expectations. This model’s point forecast for Friday anticipates a 258,000 jump in private payrolls for December (blue dot in chart below)—far above current expectations. If the actual results turn out to be anywhere near that projection, the news will offer fresh support for optimism on the macro front.
All the usual caveats apply, of course, including the fact that the ADP and government data have been known to deviate from month to month—sometimes by a lot. That said, today’s report suggests that the recent deceleration in job growth has slowed. Payrolls at private companies increased by just a fraction above the 2% mark in December vs. the year-earlier level. That’s effectively the same annual pace reported for November.
Is that a sign that job growth at the 2% mark is sustainable? Answering “yes” will get a lot easier if Friday’s number echo this morning’s profile.