The pace of job creation in the private sector accelerated last month, according to the ADP National Employment Report. The 238,000 increase (seasonally adjusted) at 2013’s close marks the third monthly rise above 200,000 and the biggest advance in more than a year. The upbeat news implies that Friday’s payrolls release from the US Labor Department for December will also compare favorably with recent history.
“The job market ended 2013 on a high note,” says Mark Zandi, chief economist of Moody’s Analytics, which produces the employment report with ADP. “Job growth meaningfully accelerated and is now over 200,000 per month. Job gains are broad-based across industries, most notably in construction and manufacturing. It appears that businesses are growing more confident and increasing their hiring.”
The next question: Are businesses also less inclined to lay off workers? Tomorrow’s weekly update on initial jobless claims will offer a clue. There’s some mildly bullish movement on this front lately, with new filings for unemployment benefits dropping in each of the past two weekly reports. If tomorrow’s news extends the trend, the case for optimism will strengthen further as we await Friday’s news from Washington.
But let’s not go overboard. Although today’s ADP data is encouraging, monthly estimates are noisy. Take another look at the chart above for the year-over-year comparisons (the red circles). ADP tells us that private payrolls increased 1.9% in December vs. the year-earlier level. That’s roughly in line with the pace we’ve seen in last year’s third quarter. Yes, it’s also a bit faster than the annual rate that prevailed earlier in 2013. But for the moment, it’s fair to say that employment is still growing at a pace that's only slightly better than we've seen lately.
If we’re finally at the stage where growth is set to pick up, we’ll see more evidence in the hard data in the weeks to come. For now, that’s still wishful thinking, albeit with a bit more confidence for assuming that the long-awaited payday has finally arrived.