May 2, 2018

April 2018 ADP Employment Report: 204,000 Private-Sector Jobs Added (See Conference Call Notes)

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

Predictions:

This report, as it did last year, has been posting larger numbers than the government’s Bureau of Labor Statistics. At this point one should presume that it typically overstate actual results by an average 20K or more (but actual differences will vary widely, as explained later).

The report will be here at 8:15, and I will attend the 8:30 conference call.

HERE IT IS —

Private-sector employment increased by 204,000 from March to April, on a seasonally adjusted basis.

From the press release:

“The labor market continues to maintain a steady pace of strong job growth with little sign of a slowdown,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “However, as the labor pool tightens it will become increasingly difficult for employers to find skilled talent. Job gains in the high- skilled professional and business services industry accounted for more than half of all jobs added this month. The construction industry, which also relies on skilled labor, continued its six month trend of steady job gains as well.”

Mark Zandi, chief economist of Moody’s Analytics, said, “Despite rising trade tensions, more volatile financial markets, and poor weather, businesses are adding a robust more than 200,000 jobs per month. At this pace, unemployment will soon be in the threes, which is rarified and risky territory, as the economy threatens to overheat.”

Previous months: The four previous months averaged 240,000. That’s only slightly lower than the 245,000 average seen for the same four months in the March report.

CONFERENCE CALL NOTES:

MARK ZANDI: Any number ot or above 200K is strong. Strong across sizes and industries and pay scales.

Employers are aggressively adding to payroll.

Technical point: BLS data more affected by weather because of higher bar for being considered employed. Have to get paid during BLS survey week; for ADP you just have to be on the payroll, even if unable to come in because of weather.

No sense of any slowing in job creation. Hiring is strong.

Question about what is sustainable. CBO says it something less than 100K/mo., really more like 80K-90K. In last six months, a bit of a pickup in participation. So we are at a point where people on the margins are coming back into the labor force. That has lifted sustainable rate of job growth temporarily.

We will see unemployment begin to decline in a more definitive way into the 3 percent range. Only seen 3 times; early 1950s, 1960s, and late-1990s. Overheating occurred in each of those instances, and that is a concern now.

Expansion is tied for second-longest in history, very good chance that it will be the longest.

Concern about overheating is being reflected in financial markets. Fed on path to normalizing interest rates by the end of the decade. LT interest rates are up.

Relationship between ST and LT rates — spread is small, and should grow. if 50 points or less, supposedly signals a recession three years down the road.

Next recession is starting to come into view.

QUESTIONS:

ME (minimum wage employment impacts): Zandi thinks that market rates might rise to that level and may not hit employment very hard. Relatively small employment effects.

States which have increased minimum wages are in hot labor markets.

Vicki Needham, The Hill: (Tariffs and recession possibilities, and what are the headwinds?) Rising-rate environment puts pressure on financial markets and housing values. We’re already observing it in reactions of investors. Also risk is in trade. At end of day, it may not have macro consequences. BUT there’s always a possibility that negotiations could deteriorate and get hostile, with the cycle not stopping, adding to inflation, etc.

FINAL NOTES: This should foretell a slightly stronger BLS figure on Friday. But as noted earlier, ADP seems to be consistently overstating job growth, so on that basis, even considering the weather catch-up factor Zandi noted, I wouldn’t expect the BLS figure Friday to come in much higher than ADP’s. Other factors are at play, which I will look at either before or after Friday’s report, depending on time availability.

Zandi’s contention (note that he said it way my contention, which is not true; I gave him a choice in my question) that minimum-wage laws might not have much employment effect would appear to have a potentially glaring exception in the New York City restaurant industry.

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2 Comments

  1. Next time please challenge Zandi on why he thinks the labor market is tight when there are 12 million adults and their kids on SNAP (i.e. Obama’s addition to the roles since he took office) available and waiting to have a shot at the brass ring? Is it his opinion they are permanently on the roles? Has he written them off? It’s time to make the cheap labor advocate come clean on his shilling for the greedy skinflint liberal elites who want to flood this country with cheap labor. His disinformation is obscene and totally insensitive to the plight of the US citizens who are poor in this country.

    Hold Zandi’s nose to the stink, make him smell the rot that he aids and abets.

    As in all things, the market adapts and employers will step up the necessary job training IF they are presented with an ACTUAL labor shortage.

    In fact, let’s start with a 2003 article from the Wharton School:

    http://knowledge.wharton.upenn.edu/article/what-labor-shortage-debunking-a-popular-myth/
    —————

    Currently:

    Mnuchin Swats Down Labor Shortage Talk

    http://www.breitbart.com/big-government/2018/04/30/mnuchin-swats-down-labor-shortage-talk/

    IF there were an actual labor shortage, wages would rise above the locality mandated minimum wage, has that happened in Seattle, New York, etc where the virtual signaling liberals forced up wages?

    The U.S. Already Has A Glut Of Low-Skilled Workers But The Trump Administration Is BETRAYING Them

    http://dailycaller.com/2018/04/24/usa-has-glut-of-low-skilled-workers/

    For the second year in a row, Nielsen indicated that the Trump administration will likely expand the H-2B visa program, which brings low skilled foreign workers to the United States to fill temporary non-agricultural jobs. This unwarranted visa increase will subject the nation’s most vulnerable workers — those who have less than a high school diploma — to competition from low-skilled foreign workers for the shrinking number of low-skilled jobs. The negative impact of such an increase on an underclass already clawing for entry level jobs — hotel workers, housekeepers, construction workers, landscapers, and food processors — is indisputable and unjustifiable.

    Even though the H-2B program is capped at 66,000 workers per fiscal year, the cheap labor lobby and lawmakers who do their bidding have repeatedly used unrelated spending measures to expand it. This year was no different, as last month’s $1.3 trillion omnibus spending bill contained a provision that gave Nielsen the authority to more than double the number of H-2B visas issued this fiscal year.

    was included in last year’s omnibus, which led to then-Secretary John Kelly approving the importation of 15,000 additional low skilled workers, caving to special interest demands and promising American workers it was a “one-time increase.” At the time, there were vast pools of unemployed, low skilled American workers; and Secretary Nielsen served as Kelly’s chief of staff.

    Comment by dscott — May 2, 2018 @ 5:06 pm

  2. ZANDI (paraphrased): “So we are at a point where people on the margins are coming back into the labor force. That has lifted sustainable rate of job growth temporarily.”

    Your point’s well-taken, esp if civilian labor force grows significantly in April. Will tally, the Trump-era total after Friday’s release.

    Comment by Tom — May 3, 2018 @ 9:05 am

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