Strong ADP Report Bodes Well for Friday BLS Payrolls Report

ADP has released its National Employment Report for the month of January. Most economists and investors try to use this as a precursor for the key payrolls report from the U.S. Department of Labor. They are not always apples to apples comparisons, but that is how the flow of economic data is treated.

The private sector added some 205,000 jobs in January’s ADP report. This is higher than the 190,000 that Bloomberg and Dow Jones were both calling for. Bloomberg listed the Econoday range of economist estimates as 160,000 to 219,000.

December’s strong report of 257,000 jobs added was revised to an even higher 267,000.

Small businesses with one to 49 employees added some 79,000 of the 205,000. Medium-sized businesses with 50 to 499 jobs added 82,000 of the January numbers, and large businesses with over 500 employees added 44,000 jobs.
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On a sector by sector view, ADP showed the following:

• Goods-producing employment rose by 13,000 jobs in January, well off from December’s upwardly revised 30,000.
• The construction industry added 21,000 jobs, which was roughly in line with the average monthly jobs gained during 2015.
• Manufacturing neither added nor lost jobs.
• Service-providing employment rose by 192,000 jobs in January, down from an upwardly revised 237,000 in December.
• Professional/business services contributed 44,000 jobs, down from 69,000 in December.
• Trade/transportation/utilities grew by 35,000, up slightly from a downwardly revised 33,000 the previous month.
• The 19,000 new jobs added in financial activities were the most in that sector since March 2006.

Ahu Yildirmaz, head of ADP Research Institute, said:

One of the main reasons for lower overall employment gains in January was the drop off in jobs added at the largest companies compared to December. These businesses are more sensitive to current economic conditions than small and mid-sized companies. Over the past year, businesses with less than 500 employees have created nearly 80 percent of new jobs.

Mark Zandi of Moody’s said:

Job growth remains strong despite the turmoil in the global economy and financial markets. Manufacturers and energy companies are reducing payrolls, but job gains across all other industries remain robust. The U.S. economy remains on track to return to full employment by mid-year.