Job growth in the private sector accelerated in February, according to the ADP Employment report. Employment rose 216,000 last month, up from January’s 173,000 gain. "This does suggest we are moving in the right direction," Beth Ann Bovino, senior U.S. economist at Standard & Poor's Ratings Services, tells Reuters. "It supports the expectations of another 200,000-plus in Friday's payroll report [from the U.S. Labor Department]. The jobs numbers are looking healthier."
Good thing, too, since the deceleration in personal income and spending still looks worrisome. If there’s a cure for this slowdown, stronger job growth is on the short list of possibilities. January's employment report was certainly helpful, although some pundits questioned if it was statistical smoke and mirrors due to seasonal adjustments. Will Friday's update bring some clarification?
"The last three monthly gains in employment shown in the ADP National Employment Report have averaged 223,000, compared to 156,000 per month over all of 2011," says Joel Prakken, chairman of Macroeconomic Advisers. "This pick-up is consistent with the recent acceleration of the nation's gross domestic product which, in the fourth quarter, grew at the fastest pace (3.0 percent) since second quarter of 2010." Prakken also thinks that today's ADP update strengthens the case for expecting February's jobless rate declined a bit.
“Everything is pointing to broader employment gains,” asserts Troy Davig, a senior U.S. economist at Barclays Capital . “As people start experiencing a steadier stream of income, that will translate into consumption and that will start building a stronger foundation for growth going forward.”
We'll need to see exactly that for arguing that the slumping year-over-year growth rate for spending and income will soon stabilize if not turn higher. Meantime, today's data point gives the optimists one more number to rally around. Before we see the official jobs report for February via the Labor Department on Friday, however, there's one more hurdle: tomorrow's update on weekly filings for new jobless benefits. The consensus forecast doesn't anticipate much of a change. Tomorrow's initial claims is expected to rise a bit to 355,000 from the previous reading of 351,000, according to Briefing.com. Lower would be better, of course, but if the recent drop in claims can hold its ground, there's still a good case for thinking that Friday's jobs report will bring another much-needed round of numerical encouragement.