Originally, I planned to add this to the GDP announcement — but that was before the BEA laid an egg, and a red egg at that. Instead, let’s look at the early indicator from ADP of Friday’s upcoming BLS jobs report, which is a lot sunnier than Q4 GDP would suggest:
Private sector employment increased by 192,000 jobs from December to January, according to the January ADP National Employment Report®, which is produced by ADP®, a leading provider of human capital management services, in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally adjusted basis. The December 2012 report, which reported job gains of 215,000, was revised downward by 30,000 to 185,000 jobs.
The BLS actually showed an increase of 155,000 jobs in December, significantly below both projections from ADP. Last year, ADP brought Moody’s on board to refine their estimates, which routinely overshot the mark by 40-50%, at least as gauged by BLS findings. The initial December estimate was 39% higher than BLS, and the final number now 19% higher, which indicates that ADP hasn’t entirely solved their estimation problems with Moody’s.
CNBC gave a credulous take on ADP’s figures, although in fairness that came prior to the release of the GDP number:
The private sector created 192,000 new jobs in January, better than expectations and reflective of the slowly improving trend in the labor market.
Small businesses led the way, adding 115,000 new positions. Services again were the most prolific suppliers of new labor, adding 177,000 workers, the bulk coming from the 40,000 in professional and business services jobs.
The manufacturing sector lost 3,000 jobs. Goods-producing businesses added 15,000 positions, primarily in construction.
Economists had expected the report, compiled jointly by ADP and Moody’s Analytics, to show the private sector created 165,000 new jobs in January.
“Job growth is accelerating,” Moody’s economist Mark Zandi told CNBC’s “Squawk Box.”
Is it, though? It’s possible that ADP will get this month exactly on the nose, but a growth rate of 192K isn’t exactly barnbusting job creation, either. It beats the 125K needed to keep up with population growth, but is otherwise a rather wan figure. If, however, ADP overshoots the mark in January as much as it did in December, the number will come in at about 139,000 on Friday — barely at treading-water levels. Besides, comparing initial estimates from ADP and Moody’s, job growth dropped in the ADP series from 215K to 192K, which is hardly the definition of “accelerating.”
With GDP falling into the red in Q4, I’d be skeptical of a significant amount of job growth over population growth. That GDP figure is a contraction, not an expansion, and there’s little reason to think that businesses would have expanded while sales retreated.