ADP Payrolls Sets Stage for Strong Labor Department Payrolls Gains

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ADP’s monthly report on private sector payrolls is often used as a barometer for how strong the payrolls gains will be from the U.S. Department of Labor later in that same week. According to ADP, private sector payrolls added some 235,000 jobs during the month of October.

The report was higher than expected, as Dow Jones was calling for a gain of 190,000 jobs in October. Reuters had a consensus estimate of 200,000 jobs.

One issue that might stand out was that September’s initial gain of 135,000 payrolls was revised to an even lower 110,000. Still, this was in the wake of two hurricanes.

Growth was seen in large employers first, with 90,000 gains, but small businesses grew by 79,000 and midsized businesses grew their payrolls by 66,000 in October. The goods-producing sectors added 85,000 jobs, dominated by 62,000 tied to construction. Of the services jobs, 150,000 were added, and professional and business services accounted for 109,000 of the gains. Information was down 27,000 jobs, and the sector under trade, transport and utilities was down 50,000.

The current forecast for Friday’s nonfarm payrolls is for a snapback report. This may seem too high after the September drop of 33,000, but that is often what happens after storm-induced and disaster-induced economic reports. Dow Jones is calling for a gain of 315,000 in the nonfarm payrolls, and Reuters is calling for a gain of 310,000 in nonfarm payrolls in October.

Each monthly ADP report is derived from ADP’s actual payroll data. It measures the change in total nonfarm private employment each month on a seasonally adjusted basis.

The team at ADP and Moody’s reported that the month was a bounce-back month in hiring. There was a hurricane impact leading to September’s weakness, and this report may add support for a strong Labor Department report this Friday.

Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, said:

The job market remains healthy and hiring bounced back with one of the best performances we’ve seen all year. Although the service providing sector was hard hit last month due to the weather, we saw significant growth in professional services, especially in the higher paid professional technical jobs. Additionally, small businesses rebounded well from the impact of Hurricanes Harvey and Irma, posting very strong gains.

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

The job market rebounded strongly from the hit it took from Hurricanes Harvey and Irma. Resurgence in construction jobs shows the rebuilding is already in full swing. Looking through the hurricane-created volatility, job growth is robust.