June 4, 2014

ADP May Private-Sector Jobs Report and Conference Call (060414): 179,000 Jobs Added

Filed under: Economy — Tom @ 8:10 am

Predictions:

I’ll be participating in the conference call following the report’s issuance.

The report will be here at 8:15 a.m.

HERE IT IS: Ruh-roh, the number is 179,000. ADP’s release isn’t loading in two different browsers, so I can’t get to any other detail. …

Ah, finally …

Highlights:

  • Small businesses (1-49 employees) +82,000
  • Medium businesses (50-499 employees) +61,000
  • Large businesses (500 or more employees) +37,000

The three previous months were revised down by a relatively insignificant combined 16,000.

From the press release:

Goods-producing employment rose by 29,000 jobs in May, up from 21,000 jobs gained in April. The construction industry added 14,000 jobs over the month, down slightly from 16,000 in April. Meanwhile, manufacturing added 10,000 jobs in May, up from April’s 2,000 and the largest number since December last year.

Service-providing employment rose by 150,000 jobs in May, down from 194,000 in April. The ADP National Employment Report indicates that professional/ business services contributed the most to the lower overall number in May – adding 46,000 jobs, down from 75,000 in April. Expansion in trade/transportation/utilities grew by 35,000, the same number of jobs added in April. The 6,000 new jobs added in financial activities was down slightly from 8,000 last month.

Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth moderated in May. The slowing in growth was concentrated in Professional/Business Services and companies with 50-999 employees. The job market has yet to break out from the pace of growth that has prevailed over the last three years.”

______________________________________

CONFERENCE CALL NOTES:

Mark Zandi: “Job Growth on a monthly basis is just below 200,000,” about where we’ve been during the past 3 years, so nothing has changed.

Most of the slowing was in professional business services. Hard to know what caused the slowdown, but suspects that temp hiring may have slowed. But hard to know.

His sense is still that job growth will be 200K+ going forward over the next several months.

Even at current pace of job growth, it feels bad in the context of unemployed and under-employed, but the current pace is really pretty good. It’s the pace that’s well above what’s needed to drive unemployment lower (!?).

Re: Debate over labor force slack really present in the market. 2 percent slack in the labor force. About one-third (0.75%) is straight-up enemployment (he thinks “full employment” is 5.5%). Another one-third are people who have withdrawn from the workforce (0.65%). The rest is PT for economic reasons, i.e., part-timers who would prefer to work full-time.

At this job growth pace, it’s going to take about 3.5 or 4 years to absorb all of that slack.

Repeats that it will be 200K+ and that it will increase to 250-300 next year and slack will get absorbed by the end of 2016.

Wage growth and inflationary pressure will remain subdued for quite a while and that Fed will remain accommodating for some time.

Housing and construction are critical. Expects to see steady pick-up. Typical econ should be producing 1.7 million housing units per year, but we’re only at 1 million.

Expects under-supplied housing market next year to drive a lot of construction in the next 2-3 years, generating econ activity and jobs. Critical element to getting to full employment.

QUESTIONS:

Me (re GDP): 4% for Q2; underlying trend is 3%.

Q1 inv. causes more optimism for Q2. 3% consistent with 225K/mo. job growth.

Rugaber-AP re slack employment: expects participation rate to come up by about one point. Slack will get absorbed in the order presented earlier.

Rugaber follow-up on job quality: Quality of job creation throughout most of recovery has been poor (that’s “typical”). More recently in last 12-18 mos. it has improved. Going forward expects a much better distribution. Key to middle-income jobs is housing. Starting to see job growth in government.

Richard (couldn’t get last name) of Reuters re productivity and inflation: Productivity declined in 1Q with no effect on job creation. Feels like underlying growth is 1.25%-1.5% per annum, which is historically slow.

This is due to recession’s surge in productivity during and just after recession, stealing away from productivity growth after that. Also, business investment has been weak.

Thinks after benchmark GDP revisions will revise growth upward in the past couple of previous quarters.

Expects productivity growth to improve a bit but not much, implying 2.25%-2.5% GDP growth long-term.

Reuters follow-up re employment slack clearing up: back to 5.5% in 18-24 months, and then people coming back into work force will take another year.

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3 Comments

  1. [...] private-sector payroll increase in April of 179,000 is worse than both terrible-weather February (198K) and pretty bad-weather March [...]

    Pingback by BizzyBlog — June 4, 2014 @ 9:24 am

  2. [...] me for not being as optimistic as Mark Zandi was on the ADP conference call yesterday about most of these people getting back into the workforce, especially as full [...]

    Pingback by BizzyBlog — June 5, 2014 @ 6:05 am

  3. [...] ADP Private Sector Payrolls for May — up 179,000. [...]

    Pingback by BizzyBlog — June 6, 2014 @ 8:38 am

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