ADP shows addition of 297,000 private-sector jobs in December

Tomorrow the Bureau of Labor Statistics will report on the unemployment rate for December, and one early indicator shows promise of significant private-sector job growth.  ADP, which manages payroll for millions of companies across the country, issued its monthly estimate yesterday that showed an additional 297,000 jobs added to the economy.  It’s the best month for ADP’s report since the recession began:

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Private-sector employment increased by 297,000 from November to December on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today.  The estimated change of employment from October to November was revised down but only slightly, from the previously reported increase of 93,000 to an increase of 92,000.

This month’s ADP National Employment Report suggests nonfarm private employment grew very strongly in December, at a pace well above what is usually associated with a declining unemployment rate.  After a mid-year pause, employment seems to have accelerated as indicated by September’s employment gain of 29,000, October’s gain of 79,000, November’s gain of 92,000 and December’s gain of 297,000.  Strength was also evident within all major industries and every size business tracked in the ADP Report.

According to the ADP Report, employment in the service-providing sector rose by 270,000 in December, the eleventh consecutive monthly gain and the largest monthly increase in the history of the report.  Employment in the goods-producing sector rose 27,000, the second consecutive monthly gain and the largest since February 2006.  Manufacturing employment rose 23,000, also the second consecutive monthly gain.

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ADP’s report only has a moderately predictive value.  Last month’s report showed a gain of 93,000 (which was readjusted to 92K in this report), but the BLS could only find an additional 39,000 private-sector jobs as the unemployment rate bumped up to 9.8%.  The scale of this increase, though, makes it unlikely that ADP has the general direction wrong, and we should see a moderately good report tomorrow at the least.

We need a monthly growth rate of over 100,000 jobs in the private sector just to keep up with population growth.  In the last three-plus years, we have only crossed that line twice, which means even when we aren’t seeing net job losses, we’re still falling further behind.  If tomorrow’s report shows an increase of around 200k-250K, that will perhaps send a signal that we’re about to start slowly making up that lost ground — but at that rate, it will take a very long time to achieve.  It could also mean that the avoidance of tax hikes on small businesses did have a mildly stimulating effect and convinced owners to invest in growth now, although we’d need to see a broader expansion over the next few months to be certain of that.

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Based on this data, I’d guess the new jobless rate will drop back to 9.6% tomorrow.  However, as more jobs get created, more people will return to the job market, which will drive up the jobless rate for a while before it starts declining again, and it’s anyone’s guess at what level of new job creation that will occur.  What do you think tomorrow’s rate announcement will land?  Take the poll:


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