ADP Sets Stage for Strong Payrolls Gains in January From Labor Department

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The economic reports for January have so far been a bit puzzling. While the readings have indicated slower growth, things were complicated by the long partial government shutdown. Friday’s payrolls and unemployment report from the U.S. Department of Labor just got a positive bias on the heels of a very strong ADP private sector payrolls report.

ADP showed that private sector employment increased by 213,000 jobs in January over December in its ADP National Employment Report. Dow Jones had called for a gain of just 183,000 jobs in January.

While the government report this Friday is from a sampling of household surveys, the ADP report is derived from actual payroll data and measures the change in total nonfarm private employment each month on a seasonally adjusted basis.

One unusual note in this ADP report was that the gains were broad-based among company size classifications. Small businesses (fewer than 50 employees) added 63,000 jobs and midsized businesses (50 to 499 employees) added 84,000. Large businesses, with over 500 employees, added 66,000 jobs.

Of the total 213,000 higher payrolls in January, some 69,000 came from the goods-producing sector, with construction adding 35,000 jobs and manufacturing adding 33,000. The natural resources and mining group actually lost 1,000.

Of the 145,000 services jobs, 46,000 were added in the professional and business services group. Education and health services added 38,000 jobs, and another 31,000 came from the leisure and hospitality group.

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

The job market weathered the government shutdown well. Despite the severe disruptions, businesses continued to add aggressively to their payrolls. As long as businesses hire strongly the economic expansion will continue on.

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

The labor market has continued its pattern of strong growth with little sign of a slowdown in sight. We saw significant growth in nearly all industries, with manufacturing adding the most jobs in more than four years. Midsized businesses continue to lead job creation, however the share of jobs was spread a bit more evenly across all company sizes this month.