ADP Offers Big Upside Surprise for Year-End Job Hires for Friday’s Unemployment Report

At the start of every month, the ADP National Employment Report, which covers private sector employment, is used as a precursor for the more important Labor Situation report from the Bureau of Labor Statistics (BLS). The numbers are rarely identical because the samplings are different. Still, what often occurs is that if the ADP is way up or way down it acts as a benchmark for whether the BLS report will be weaker or stronger.

ADP’s report showed that the economy in its sampling pool of companies added a sharp 271,000 private sector jobs during the month of December. The Wall Street Journal and Reuters only had a consensus estimate of 178,000 in net new jobs for the month.

While the indication should bolster expectations for the main BLS report this Friday, this also keeps that pesky rate-hike desire of the Federal Reserve in the game despite what was a very volatile month in the financial markets. Does “the worst December since the 1930s and the Great Depression” ring a bell?

The Wall Street Journal’s median forecast for nonfarm payrolls was 184,000 for December, compared with 155,000 in November.

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Of the 271,000 net new jobs in December, midsized businesses with 50 to 499 employees added the largest piece of the pie with some 129,000 jobs. Small businesses (less than 50 people) added 89,000 jobs in December, and the large businesses (over 500 workers) added in 48,000.

The United States remains a services economy. The so-called goods-producing sector added 47,000 jobs in December, compared with some 224,000 in the service-providing sectors. Professional and business services accounted for 66,000 of those service jobs, with education and health services adding 61,000 and leisure and hospitality adding 39,000.

Two quotes sum up what a strong month it was for hiring in December. The first is from Ahu Yildirmaz, vice president and co-head of the ADP Research Institute:

We wrapped up 2018 with another month of significant growth in the labor market. Although there were increases in most sectors, the busy holiday season greatly impacted both trade and leisure and hospitality. Small businesses also experienced their strongest month of job growth all year.

Mark Zandi, chief economist of Moody’s Analytics, said:

Businesses continue to add aggressively to their payrolls despite the stock market slump and the trade war. Favorable December weather also helped lift the job market. At the current pace of job growth, low unemployment will get even lower.

The ADP report is done in collaboration with Moody’s Analytics and is derived from ADP’s actual payroll data. Similar to the BLS methodology, the ADP report measures monthly changes in the total nonfarm private employment sector on a seasonally adjusted basis.

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