February 3, 2016

January ADP Employment: 205,000 Private-Sector Payroll Jobs Added; See Conference Call Notes; Downward Revs to 4Q15 GDP (to 0.0 Pct. – 0.5 Pct.) Expected

Filed under: Economy,Taxes & Government — Tom @ 7:15 am

Predictions, per Yahoo’s Economic Calendar: 180,000 private-sector jobs added per Briefing.com; “market expects” 190,000.

The report will be here at 8:15. I will sit in on and take notes during the conference call which begins at 8:30.

HERE IT IS (direct link):

ADP National Employment Report: Private Sector Employment Increased by 205,000 Jobs in January

From the press release:

… Payrolls for businesses with 49 or fewer employees increased by 79,000 jobs in January, down from December’s upwardly revised 101,000. Employment among companies with 50-499 employees increased by 82,000 jobs, up still further from December’s upwardly revised 77,000. Employment at large companies – those with 500 or more employees – came in at 44,000, half of December’s downwardly revised 88,000. Companies with 500-999 added 15,000 jobs, while companies with over 1,000 employees gained 30,000 jobs.

Goods-producing employment rose by 13,000 jobs in January, well off from December’s upwardly revised 30,000. The construction industry added 21,000 jobs, which was roughly in line with the average monthly jobs gained during 2015. Meanwhile, manufacturing neither added nor lost jobs.

Service-providing employment rose by 192,000 jobs in January, down from an upwardly revised 237,000 in December. The ADP National Employment Report indicates that professional/business services contributed 44,000 jobs, down from 69,000 in December. Trade/transportation/utilities grew by 35,000, up slightly from a downwardly revised 33,000 the previous month. The 19,000 new jobs added in financial activities were the most in that sector since March 2006.

“One of the main reasons for lower overall employment gains in January was the drop off in jobs added at the largest companies compared to December. These businesses are more sensitive to current economic conditions than small and mid-sized companies,” said Ahu Yildirmaz, VP and head of the ADP Research Institute. “Over the past year, businesses with less than 500 employees have created nearly 80 percent of new jobs.”

Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth remains strong despite the turmoil in the global economy and financial markets. Manufacturers and energy companies are reducing payrolls, but job gains across all other industries remain robust. The U.S. economy remains on track to return to full employment by mid-year.”

Revisions:
- December went from 257K to 267K.
- November went from 211K to 201K.

Conference call and notes are coming up.

CONFERENCE CALL NOTES:

Mark Zandi: Another month, another strong jobs number, like a broken record. 200k+/mo. for close to four years. Rock solid job growth, broad-based, with the exception of the energy sector (-10k/mo.).

Mfg. is soft, though it was flat in January. Strong activity in vehicle-related manufacturing.

Info services (media) – some losses there.

Newfound strength during the past year or so in construction. Financial services is now adding strongly and consistently.

Broad-based across all company sizes. Midsize had a particulatly good month.

ADP is consistent with other labor market indicators. UI claims remain low (!), consumer confidence is holding up via Conference Board. Layoff announcements outside of energy aren’t huge. Labor market is holding up.

Developing gap between job growth and payroll growth, esp in the 4th quarter. Weak GDP, strong job growth, reflected in productivity numbers.

So should we focus on weak GDP or strong job growth? We should downweight GDP and overweight jobs, because we can count jobs. ADP and BLS are both broad-based. We’re having an increasingly hard time counting GDP. Errors have grown in recent years, because of technology sector. Having a hard time picking up what’s going on in regard to social media, and BEA doesn’t have a grip on it.

GDP is conceptually very difficult to get right, particularly in a period of significant change.

Having said that, productivity growth has weakened, which does partially explain weak GDP vs. strong jobs.

0.5 percent per annum during past 5 years — very, very weak. Since WWII, it averaged 2 percent. Expect 1.5 average going forward.

What’s going on? (People are demoralized! — Ed.) Is it going to stick around for a while? If it does, liviing standards won’t go up, funding entitlements will be tough, returns on assets won’t be much, housing values will get stuck.

Weak productivity growth helped us get back to near full employment, which we should get to by summer. This is the biggest threat to econ optimism.

Thinks the productivity holdbacks are cyclical and temporary. Changes in the financial system and increased regulatory costs in the financial system, raising capitalization has held back productivity.

Nonfinancial corporate productivity has been growing at 1.75 percent during the past five years.

The process of absorbing Dodd-Frank is through, so productivity should pick up. (Really? Dodd-Frank is a permanent impediment to every deal and every mortgage loan closing.)

Recession knocked the wind out of animal spirits, hurting business formation, and # of establishments has declined, but now biz formation is increasing again. (Sounds like a critique of the six years after the recession to me. Why didn’t the animal spirits come back for so long, assuming they’re really back? — Ed.)

Tech sector now has booming growth again, and animal spirits are coming back.

Mobility of labor force is also key and getting people into jobs which match their skills. Labor mobility came to a standstill in recession. Job openings are at record high, mobility is picking up, and result is that we’re going to get better matching in the labor force, which should cause productivity to pick up.

Other economists think secular stagnation is a longer-term problem.

QUESTIONS:

Me (re GDP and NSA numbers): Expects GDP to come down in revisions because of inventories. Could be closing in on zero. Second estimate will be lower than the first — between an annualized 0.0 percent and 0.5 percent. High Frequency GDP estimate has been revised downward to he thinks 0.4 percent. (Note: That revision appears to be behind the subscription wall. Currently, Moody’s is predicting 1Q16 growth of an annualized 1.2 percent. — Ed.)

Has no info on NSA numbers.

That was the only question (!). (makes you wonder if anyone else was on the call)

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2 Comments

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  2. [...] also attended the 8:30 a.m. conference call which followed the report’s release. It’s clear that he did so because his coverage, [...]

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