Quick Take on ADP Jobs

The ADP National Employment Report for December – the private-sector analog to the official employment report that will come out Friday – showed an increase of 297,000 private-sector jobs.

• There was strength across the board:
  • Goods producing jobs rose by 27,000
  • Services jobs jumped 270,000
  • Small business jobs climbed by 117,000
  • Medium sized firms added 144,000 jobs
  • Large company employment rose 36,000

• The December increase comes on the heels of accelerating increases in September (29,000), October (79,000), and November (92,000).

These data suggest that Friday’s official jobs number will exceed the consensus forecast of 140,000. 

• Governments will continue to shed employees, lowering total job growth.
• Jobs creation remains well below the sustained rate needed to lower the unemployment rate meaningfully.  As discouraged workers return to the labor force, expect the unemployment rate to rise above 10 percent before falling in a sustained way.

The ADP Report is additional evidence that the weak November employment report was an anomaly. 

Bottom line: As anticipated, the economy continues its steady, if unspectacular, recovery and job growth is finally reflecting the pace of recovery.  Nevertheless, the level of employment remains low and the return of discouraged workers to the labor force will drive the unemployment rate up before it begins to steadily decline.