2018 got off to a vigorous jobs start in January, with private sector businesses creating a hefty 234,000 jobs; well above the 185,000 anticipated by economists.
“The job market juggernaut marches on,” Mark Zandi, chief economist for ADP/Moody’s Analytics announced in a statement. “Given the strong January job gain, 2018 is on track to be the eighth consecutive year in which the economy creates over 2 million jobs…if it falls short, it is likely because businesses can’t find workers to fill all the open positions.”
According to Automatic Date Processing Inc (ADP), the biggest jobs gains – 212,000 – came from the service-related sector. Within service-related industries, Trade transportation and utilities led with 51,000 jobs, followed by Education and health services (47,000), Professional business services (46,000) and Leisure and hospitability services ( 46,000 jobs).
Manufacturing added 12,000 new jobs and the construction area, 9,000 despite this very slow month for the industry.
The largest gains came from mid-sized businesses, or those with 50- 499 employees.
“We’ve kicked off the year with another month of unyielding job gains,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Service providers were firing on all cylinders, posting their strongest gain in more than a year. We also saw robust hiring from midsize and large companies…”
ADP’s latest figures come with a wage growth faster than it has been since 2009 and a national unemployment rate of 4.1 percent, the lowest since 2000.
In his State of the Union address, President Donald Trump reported the unemployment rate for African Americans is 6.8 percent. The lowest in recorded history and Hispanic unemployment is at 4.9 percent, down from 5.9 in December 2016.
“It’s obviously very strong,” Zandi said of the jobs market. “The current pace of jobs growth suggests an unemployment rate in the mid 3 percent range by the end of 2018.”
Zandi goes on to add that this rate of gains may actually push the Federal Reserve to become more aggressive with interest rates. (The Federal Open Market Committee ended its 2-day meeting on Wednesday, January 31.) The market does not expect a change in rates until March.
“I’d be pretty surprised if they don’t revise up [from the probable three quarter-point increases] and give us four rate increases this year. Every time employment goes past full employment in a meaningful way, you have a recession,” Zandi observed. “It’s going to be pretty tough to land the plane on the tarmac, so the Fed’s got to get going here.”
Paul Ashworth, chief U.S. Economist at Capital Economics said the strong ADP jobs report may indicate that the government’s weak job gains of 148,000 for December 2017 was “not the start of any serious downturn in labor market conditions.”
Ashworth continued, “Overall the stronger than expected ADP jobs count will keep the pressure on the Federal Reserve to continue hiking interest rates.”
According to Labor Department figures, average monthly payroll growth has slowed from 187,000 in 2016 and 171,000 in 2017. Nevertheless, these monthly advances far exceed the 100,000 needed to keep lowering the jobless rate. The tight labor market should lead to quicker pay increases in 2018.
From the ADP Website:
The ADP National Employment Report® is a monthly measure of the change in total U.S. nonfarm private employment derived from actual, anonymous payroll data of client companies served by ADP®, a leading provider of human capital management solutions. The report, which measures nearly 24 million U.S. workers, is produced by the ADP Research Institute®, a specialized group within the company that provides insights around employment trends and workforce strategy, in collaboration with Moody’s Analytics, Inc. Each month, ADP issues the ADP National Employment Report as part of the company’s commitment to adding deeper insights into the U.S. labor market and providing businesses, governments and others with a source of credible and valuable information. The ADP National Employment Report is broadly distributed to the public each month, free of charge.
The data for this report is collected for pay periods that can be interpolated to include the week of the 12th of each month, and processed with statistical methodologies similar to those used by the U.S. Bureau of Labor Statistics to compute employment from its monthly survey of establishments.