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US: ADP Employment Report
| Consensus | Consensus Range | Actual | Previous | Revised | |
| Private Payrolls - M/M | 45,000 | 30,000 to 65,000 | 22,000 | 41,000 | 37,000 |
Highlights
The ADP national employment report for January points to broad-based softness in private sector hiring with the exception of one category. Although hiring in education and health services has maintained a robust pace in recent months, high labor demand in a single sector cannot disguise that conditions are weaker overall.
Private sector payrolls are up 22,000 in January after a downward revision to up 37,000 in December. The January increase is below the consensus of up 45,000 in the Econoday survey of forecasters. Goods-producers add a scant 1,000 in January with an increase of 9,000 in construction, a decrease of 8,000 in manufacturing, and no change in natural resources and mining. Service-providers add 21,000 workers on net. There are gains of 74,000 in education and health services, 14,000 in financial activities, 4,000 in leisure and hospitality, and 4,000 in trade, transportation, and utilities. This is offset by a sharp 57,000 decline in professional and business services, 13,000 in other services, and 5,000 in information.
Payroll gains in January are concentrated at medium sized establishments (50-499 workers) with an increase of 41,000. Small businesses (1-49 workers) had no change in payrolls and large firms (500+ workers) cut 18,000 jobs.
The ADP pay insights show a 4.5 percent median annual increase for job-stayers in January, the same as in the prior month. For those changing jobs, the median annual increase is 6.4 percent, down from 6.6 percent in December.
The current labor market favors a subset of workers with the right skills and/or experience, However, it is less favorable overall. Firms that cannot compete in compensation for the workers in short supply are having to do without. Businesses who currently have skilled workers on staff are still upping compensation to retain those workers. Elsewhere, businesses are seeing less upward pressure of compensation as the supply of labor eases.
Market Consensus Before Announcement
Private payrolls seen up another modest 45K in January after 41K in December.
Definition
The national employment report from Automated Data Processing Inc. is computed from ADP payroll data and offers advance indications on the U.S. workforce. ADP's data cover more than 500,000 companies totaling more than 25 million employees. The report is produced by ADP Research Institute in collaboration with Stanford Digital Economy Lab.
Description
Market players have become accustomed to the excitement on employment Friday and realize the rich detail of the monthly employment situation can help set the tone for the entire month. While economists have improved their nonfarm payroll forecasts over the years, it is not unusual to see surprises on employment Friday. To that end, the ADP's national employment report can help improve the payroll forecast by providing information in advance of the employment report.
The employment statistics also provide insight on wage trends, and wage inflation is high on the list of enemies for the Federal Reserve. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus.
By tracking jobs, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.
