May 30, 2018

May 2018 ADP Employment Report (053018): 178,000 Private-Sector Jobs Added; Previous Months Written Down by 108K (Also Conference Call Notes)

Filed under: Economy,Taxes & Government — Tom @ 7:46 am

Predictions:

As was the case in 2017, this report has been showing more private-sector job additions than the government’s Bureau of Labor Statistics. But the differences aren’t as great as those we seen last year. Through this year’s first four months, ADP shows 914,000 private-sector jobs added; BLS shows 812,000.

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

HERE IT IS: A bit lower than expected, for the first time in a while —

Private-sector employment increased by 178,000 from April to May, on a seasonally adjusted basis.

From the press release:

“The hot job market has cooled slightly as the labor market continues to tighten,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Healthcare and professional services remain a model of consistency and continue to serve as the main drivers of growth in the services sector and the broader labor market as well.”

Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth is strong, but slowing, as businesses are unable to fill a record number of open positions. Wage growth is accelerating in response, most notably for young, new entrants and those changing jobs. Finding workers is increasingly becoming businesses number one problem.”

Previous months were revised down considerably:

  • April went from 228K to 163K (65K drop).
  • March went from 241K to 198K (43K drop; March was also originally 241K).

That’s a huge, 108K drop in prior-month figures.

CONFERENCE CALL NOTES:

MARK ZANDI; Very solid, but we’ve seen some slowing in job growth due to increasing difficulty businesses are having filling open positions. Record job openings per BLS. Only sector that is soft is brick-and-mortar retailers. Higher minimum-wage increases may be having an impact too in that area.

Wage growth is picking up (again). Employment Cost Index is pushing 3 percent. ADP wage data indicating acceleration of wage growth. Job-changers are seeing stronger wage growth.

Growth is being constrained for the first time in over a decade by a shortage of workers, which will intensify given the fiscal stimulus hitting the economy (tax cuts, govt. spending).

Projecting employment growth at current rate of growth will cause the unemployment rate to hit 3.0 percent by the end of the decade.

Job growth is broad-based. Contstruction, manufacturing, health care, education. Also across company sizes, unlike 7-8 years ago, when adds were more in larger-company sector. Everyone’s firing on all cylinders.

Slowing job growth due to tight labor supply.

QUESTIONS:

ME (average work week with every new job since December 2016 being full-time and previous-month writedowns in today’s ADP report) — Really no good answer. Says he’ll look at ADP data for work-week evidence. There has been a long-term trend towards reduced work weeks which might be offsetting otherwise expected upward moves.

Rugaber from AP on effects of tariffs; Not seeing it in jobs data yet. If it appears it would be in manufacturing and transportation and agriculture, but no evident in data so far. Too early to tell. Not affecting hiring, but may be affecting business investment. Currently, businesses may be hiring in advance of the need.

OVERALL: I’m not chastened by Zandi’s optimism. Guarded optimism is justified, but that’s it. All of a sudden, a report which turned in results over 240K per month in December, January, and February show an average of only 180K per month in the past three months. Stabilizing at that level in future months would be okay; further declines would not be okay.

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