April 4, 2018

March 2018 ADP Employment Report (and Conference Call Notes): 241K Private-Sector Jobs Added

Filed under: Economy,Taxes & Government — Tom @ 6:56 am

Predictions:

  • CNBC is carrying a prediction of 205,000 private-sector jobs added, along with forecasting 195,000 total jobs added in Friday’s employment report from the government.
  • Investing.com predicts 208,000.
  • FXStreet.com has 210,000.

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

The conference call will start at 8:30. One key question will be what caused ADP to pull back 285,000 from prior months in its February report.

HERE IT IS: Another upside surprise

Private-sector employment increased by 241,000 from February to March, on a seasonally adjusted basis.

From the press release:

“We saw impressive momentum in the first quarter of 2018 with more jobs added per month on average than in 2017,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Midsized businesses added nearly half of all jobs this month, the best growth this segment has seen since the fall of 2014. The manufacturing industry also performed well, with its strongest increase in more than three years.”

Mark Zandi, chief economist of Moody’s Analytics, said, “The job market is rip-roaring. Monthly job growth remains firmly over 200,000, double the pace of labor force growth. The tight labor market continues to tighten.”

Prior-month revisions:

  • February — Was 235K, now 246K.
  • January — Originally 234K, revised to 244K in February, now 241K.
  • December — Originally 250K, revised to 242K in January, revised to 249K in February, now 249K.

ADP says that private sector has added 977,000 jobs in the past four months.

CONFERENCE CALL NOTES:

MARK ZANDI, Moody’s: Another very strong ADP number. Anything over 200K is a very strong number, roughly twice workforce gains. Strong across-the-board.

Labor market is in high gear.

BLS employment gains may come in soft compared to ADP because of weather during the BLS survey week. BLS may be softer than that due to that situation.

Everything suggests a rip-roaring labor market. Record number of open positions. Quit rates are high. Wage growth is “picking up on cue,” and is on track to be closer to 3 percent YOY.

Q1 GDP will be soft, close to 2 percent, which belies the strength of the economy. Residual seasonality still a problem with GDP.

Re trade, the impact on US economy will be small. US and China have increased tariffs on about $50 billion worth of stuff. 0.1-0.2 reduction in GDP due to this. So a dent in growth, but just a dent. Relatively minor from a macro perspective.

BUT the script is still being written, and the trendlines and tit-for-tat do pose a risk to outlook. Tariffs to increase manufacturing jobs won’t generate a huge number of jobs, but it will cost net jobs in the economy.

The real action is on the services side. US has a surplus in services. Those sectors provide lots of jobs. Compromising open trade in services could hurt U.S. badly.

It’s going to take a lot to derail the economy, Lots of stimulus from tax cuts and government spending. A year from now, unemployment will be closer to 3 percent than 4 percent.

QUESTIONS:

ME (on prior-month downward 285K revision, and implication on credibility of current numbers) — was done to reflect BLS comprehensive benchmark revision. Can’t tell re future.

Chris Rugaber, AP (new job market entrees, especially last month, what will happen in future) — Zandi doesn’t think there are a lot more people who are going to come back into the labor force. Number of people who say they would take a “suitable” job is a bit on the high side, but not a huge number. Alan Krueger made a strong case that new entrants aren’t plentiful, especially given the opioid crisis.

Zandi thinks EPOP (employment-population ratio) is “normalized” and where we would expect it to be in a full-employment economy.

Also, pop growth may be slowing because of immigration enforcement.

At some point, 100K per month additions will be OK, because of low unemployment rate. We won’t see 100K per month for a while because businesses will do all they can to hang on to people. But it will start happening in 2020 or so.

Richard (wage growth, when will we see steady acceleration): Zandi says we’re already seeing it. We’re firmly at 2.5 percent to 3.0 percent. Firmly over 3 in a year and 3.5 percent in another year.

Richard (Fed reax to wage growth): The economy is screaming for the need for more Fed rate hikes to the point of renormalizing them.

_______________________________

UPDATE, 4 P.M.: The Wall Street Journal headlined “Manufacturing Industry Has Strongest Jobs Increase in Three Years,” but didn’t tell readers what that increase was.

It was 29,000. The other goods-producing industries were also positive: Construction, +31,000; Mining, +5,000, for a grand total of 65,000.

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3 Comments

  1. Zandi doesn’t think there are a lot more people who are going to come back into the labor force.

    How did Zandi come to this conclusion given the millions still on SNAP and the millions of college students who took out billions of $ in loans to delay entry into a weak job market.

    What this is, is the cheap labor advocates attempting to make the case for keeping the illegals to permanently displace Americans and keep them out of the labor force to create a permanent underclass. Shame on Zandi and the elites who lust for political power. SHAME!!!!

    Comment by dscott — April 4, 2018 @ 7:00 pm

  2. Cheap labor lobby all upset because they have to pay the help more money…

    Nation’s lowest unemployment rate is no paradise for Hawaii

    http://www.hawaiinewsnow.com/story/37875436/whats-wrong-with-very-low-unemployment-hawaii-knows

    Comment by dscott — April 4, 2018 @ 7:27 pm

  3. [...] in a sense be consistent with Moody’s economist Mark Zandi said in the ADP Employment Report conference call on Wednesday. Zandi said that storm-related factors in the Northeast might suppress hiring there. ADP’s [...]

    Pingback by BizzyBlog — April 6, 2018 @ 7:30 am

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