March 8, 2017

February 2017 ADP Employment Report: 298K Private-Sector Jobs Added, Highest in Three Years (See Conference Call Notes)

Filed under: Economy,Taxes & Government — Tom @ 7:02 am

Predictions, per Yahoo’s Economic Calendar — 180,000 to 200,000 private-sector jobs added.

The home page for the report is here, and this month’s report will be released at 8:15.

HERE IT IS: Uh … wow

Private-sector employment increased by 298,000 from January to February, on a seasonally adjusted basis.

Zero Hedge, headlining a “Trump effect,” is saying that this is the biggest number in six years, with the good-producing figure the highest in the history of the report. (UPDATE: The Associated Press is reporting that it’s the highest figure in three years, but also that “The gains were led by a huge 66,000 increase in construction, the most in 11 years, and 32,000 manufacturing jobs, the most in five years.”

From the press release:

February 2017 Report Highlights*

Total U.S. Nonfarm Private Employment: 298,000

By Company Size:
- Small businesses: 104,000
– 1-19 employees 51,000
– 20-49 employees 53,000
- Medium businesses: 122,000
– 50-499 employees 122,000
- Large businesses: 72,000
– 500-999 employees 28,000
– 1,000+ employees 43,000

By Sector:
- Goods-producing: 106,000
–Natural resources/mining 8,000
–Construction 66,000
–Manufacturing 32,000
- Service-providing: 193,000 …

“February proved to be an incredibly strong month for employment with increases we have not seen in years,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Gains were driven by a surge in the goods sector, while we also saw the information industry experience a notable increase.”

Mark Zandi, chief economist of Moody’s Analytics said, “February was a very good month for workers. Powering job growth were the construction, mining and manufacturing industries. Unseasonably mild winter weather undoubtedly played a role. But near record high job openings and record low layoffs underpin the entire job market.”

Prior months:


Mark Zandi, Moody’s:

Blowout number, very big. 3x the rate of job growth necessary to absorb working-age population. Any slack in the labor market is rapidly being absorbed.

Broad-based, but most notably a turn in the mining industry.

But underlying job growth is really 150-200K, as mild weather played a role, as evidenced in construction, and it should steal growth from future months.

Three reasons for job growth: 1) Econ fundamentals are good. Business Balance sheets are strong. Consumers in relatively good shape. 2) Global econ is lifting. But global econ is improving. Dollar value soaring has weighed on growth. Trade throughout Asia has responded well. Europe is improving despite Brexit. Rest of emerging world doing well. 3) Businesses are feeling better after the election, based on confidence surveys and expectations of less regulation in certain industries – and this is showing up in the hiring data. Post-election bounce is now showing up to some degree in the labor market data.

At this pace of job growth, if 150-200K, market will tighten, and wage growth will pick up and press the Fed to normalize rates in a likely series of hikes. Possible rapid rate of normalization. (“pressing on the brakes”).

This suggests a strong number on Friday from the government.

ADP’s new model is performing remarkably well. Friday will be a big test, given how large today’s number is.

Questions –

ME (the only question!! — really? On an off-the-charts day for the report?) — (Qs were re current low 1Q GDP estimates, absorption of sidelined employees, ADP’s revs to Dec) — Zandi still thinks GDP understates economic strength, and that 1Q GDP figures still have residual seasonality which keep the reported figure down below true underlying strength. Not putting much weight on it. As to sidelined people, there is some sign of people returning to the workforce. If participation rate is stable, that’s really an improvement, because Boomer retirements would be expected to take it down a few tenths of a percent each year. Number of people who would take a job if one came along is coming down. We’re going to absorb those folks in the next 6-12 months. (That long?) New model may be generating bigger revs than old.


If I had known I’d be the only questioner, I’d have asked Zandi if he thinks there’s going to be big upside movement in 1Q GDP estimates in the next 50 days between now that the time of the government’s first release in late April, and especially by the time the third estimate is released in late June. January’s and February’s combined 559,000 private-sector job adds (760K in past three months) would seem to indicate that this is in the works, but it’s obviously too early to tell, and a lot of other hard economic data is nowhere near as strong.

Especially if March comes in at either January’s or February’s level, I suspect that all of the people who have been claiming for years that 1Q GDP numbers aren’t being seasonally adjusted correctly are going to be left slack-jawed — but, it’s early and we need to see if Friday’s official numbers from the government reflect what ADP has been reporting.


1 Comment

  1. [...] mining and manufacturing employment grew by amounts (58K, 9K, and 28K) similar to those seen in Wednesday’s ADP report (66K, 8K, and [...]

    Pingback by BizzyBlog — March 10, 2017 @ 11:21 am

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