Private payrolls in the U.S. increased by 118,000 last month, according to the ADP Employment Report. As expected, that’s a slowdown from October’s 157,000 rise (on a seasonally adjusted basis). Many economists will chalk up the slower rate of growth to Hurricane Sandy’s negative influence. Maybe. For now, it’s a plausible argument. Nonetheless, today’s ADP number tells us to remain cautious on expecting anything other than a comparably lower rate of jobs growth when the Labor Department publishes the official November payrolls report on Friday.
"Superstorm Sandy wreaked havoc on the job market in November, slicing an estimated 86,000 jobs from payrolls," says Mark Zandi, chief economist of Moody's Analytics, the firm that crunches the ADP numbers. "The manufacturing, retailing, leisure and hospitality, and temporary help industries were hit particularly hard by the storm."
Not everyone agrees, but for the moment there’s not much to do but wait for the next number. If Friday’s Labor Department update is considerably weaker than expected, the business cycle outlook will darken further. Actually, the consensus forecast is already discounting a sizable slowdown in the government figures: a gain of around 95,000 for private payrolls in November, or half as much as October’s 184,000 pop. If that estimate holds up, Friday’s update will bend but not yet break the argument that payrolls have succumbed to the darker angels of the cycle.
What might change the dynamic to something more agreeable? A resolution of the fiscal cliff nonsense would help. Indeed, by some accounts, the economy still has a fundamental capacity for growth. “Outside of Sandy, I think businesses are still hiring,” opines Gus Faucher, an economist with PNC Financial Services. “There’s underlying job growth that’s strong enough to employ new entrants into the labor force as well as some of those who lost their jobs going into the recession.”
That’s an intriguing theory, but one that will take time to prove, or not. The next clue comes in tomorrow’s weekly jobless claims report. The consensus outlook sees more repair and recovery after the hurricane-related surge in new filings from a few weeks back. But the R&R is expected to be mild, with only a slight drop to 380,000 from the previous week’s 393,000. Better, but still sluggish enough to keep everyone guessing.