January 5, 2017

December 2016 ADP Employment Report: 153,000 Private-Sector Jobs Added

Filed under: Economy,Taxes & Government — Tom @ 8:32 am

OVERVIEW: On the conference call, Mark Zandi laid down the marker that future job growth can’t possibly exceed 1.25 million per year without more immigration.

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From ADP:

Private-sector employment increased by 153,000 from November to December, on a seasonally adjusted basis.

From the press release:

“As we exit 2016, it’s interesting to note that the private sector generated an average of 174,000 jobs per month, down from 209,000 in 2015,” said Ahu Yildirmaz, vice president and head of the ADP Research Institute. “And while job gains in December were slightly below our monthly average, the U.S. labor market has experienced unprecedented seven years of growth that has brought us to near full employment. As we enter 2017, the tightening labor market will likely slow the growth.”

Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth remains strong but is slowing. The gap between employment growth in the service economy and losses on the goods side persists. Smaller companies are struggling to maintain payrolls while large companies are expanding at a healthy pace.”

Prior months:
- November — Now 216K, no change.
- October — Now 124K, was 199K in November, was originally 147K.
- September — Now 196K, was originally 154K.

CONFERENCE CALL NOTES:

MARK ZANDI: Another solid report, twice what is needed to absorb extra labor.

Goods side of the economy is still soft, including resources and mining, manufacturing. Construction has also recently gotten soft, with housing leveling off (supposedly temporary).

Broad-based growth in services.

Very strong retail employment gains, foreshadowing a retail bounceback in BLS numbers.

Recent weakness in employment growth among smaller companies, too early to call a trend. Big employers (1000+) are doing well, suggesting that they’ve adjusted to world econ situation. Overall, a solid report.

Going on 7 years of job growth. Very close to full employment. U-6 rate needs to get to 9% before it’s official. “Wage growth is picking up on cue.” (!!??) Atlanta Fed says we’re closing in on 3 percent. 3-1/2% is where we’re headed, which would be considered acceptable.

Re fiscal and monetary policies lead to more or less job creation — Once econ gets to full employment, the amount of jobs that can be created by definition will be dictated by increase in available labor supply. That number is about 1.25 million people per year at most, translating to 100K per month, but we can’t expect any better than that for the next four years (about 5 million). We’re NOT going to create more than that, and it CANNOT change unless MORE immigrants come into the country. The labor supply is FIXED, and job growth CANNOT improve without more immigration.

Now there is more pressure on the Fed to normalize interest rates. Going to pretty tough for the Fed not to kick up rates.

Bottom line: Things are good. 2016 was a really good year for the economy. 2017 should be another good year, and it would take an awful lot to derail it.

QUESTIONS:

ME (GDP estimate of 1.9 percent for 4Q16, which reflects Atlanta Fed) — Answer: Being held back by trade. Q3 trade improvement won’t repeat. Government spending of the type which contributes to GDP appears to be weak and declined in Q4. Public construction has been unusually weak. Consumer spending is fine and is picking because the worst of the energy downturn is over.

No other Qs.

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2 Comments

  1. Mr. Zandi’s remarks are not solidly affixed to reality. For instance:
    1. His statement that, once we get to ‘full employment’, job creation above 100,000 per month will require in erased immigration. For some years now, the target number for just keeping level with population growth has been about 50% higher than that. See http://blogs.wsj.com/economics/2016/04/07/the-new-magic-number-for-monthly-job-growth-145000/ for an April 2016 WSJ look at this statistic.
    2. ‘Full employment’. The statistic he refers to does not take into account those who have lost hope in the job market because of the abysmal economy of the past 8 years. Nor does he take into account the number of people who are underemployed – meaning working part-time instead of full-time, had their full-time hours downgraded to 30, or have taken any job at all to keep food on the table and the table under a roof (an electro-mechanical assembler working as a fry cook is not a full employment success story).
    3. ‘Wage growth is picking up on cue.’ Really? What alternate universe are you living in, Mr. Zandi? The universe I inhabit has seen years of downward earnings pressure on technical jobs, succeeded by a flabby ‘rebound’. I just don’t see this statement supported by reality

    Comment by David Sauls — January 5, 2017 @ 10:20 am

  2. Thanks for the comment, David.

    Could not agree more with all three of your points.

    But what Zandi HAS done is lay down a marker against which he can be evaluated down the road. If he’s as wrong as we both believe he is, you can be assured that yours truly will remind him.

    Comment by Tom — January 5, 2017 @ 11:24 am

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