Jobs Picture Improves in December, ADP Report Says

By Reuters  |  Posted 2011-01-05 Email Print this article Print
 
 
 
 
 
 
 

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Private sector employment surged in December, showing the biggest-ever rise in private payrolls, surprising economists and signaling that the economy may be on the mend.

(Reuters) - A surprise surge in private-sector employment last month for its biggest-ever rise in a private payrolls report provided the most bullish signal in months that the economy is on the mend.

Private employers added 297,000 jobs in December, triple the median estimate by economists and up from the gain of 92,000 in November, an ADP Employer Services report, whose data goes back to 2000, showed on Wednesday.

The report undercut the prices of the U.S. Treasury securities, and helped the U.S. dollar gain against the yen and the euro. U.S. stocks opened lower though they did pare losses after the jobs news.

"Sometimes numbers come as bolts from the blue; this is one of them," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

"Nothing in any other indicators of the state of the labor market last month -- jobless claims, help wanted, surveys -- suggested anything like this was remotely likely."

"We now have to expect a much bigger number on Friday, 250,000?" he said of the government's much more comprehensive labor market report due on Friday.

That report, which includes both public and private sector employment, is expected to show a rise in overall nonfarm payrolls of 140,000 in December, based on a recent Reuters poll of analysts, including a rise in private payrolls of 145,000.

Adding to the rosy employment picture, the number of planned layoffs at U.S. firms fell last month to the lowest level in 10 years, according to a report by consultants Challenger, Gray & Christmas Inc.

Tempering some of the optimism on Wednesday, an industry group said applications for U.S. home mortgages ebbed in the last couple of months of the year, with loan rates hovering around their highest levels in seven months.

The ADP report, developed by Macroeconomic Advisers LLC, is often used by economists to fine-tune their forecasts for the payrolls numbers, though it is not always accurate in predicting the outcome.

The vast majority of the jobs increase, 270,000 jobs, was concentrated in the service-providing industries while the goods-providing industries contributed 27,000 jobs with manufacturing up by 23,000 jobs, Barclays analyst Theresa Chen wrote in a note.

She said the surprise boost was driven by hiring in small and medium firms but added: "The ADP data often do not predict well the changes in non-farm payrolls within the same period, so we are not revising our payroll forecast in response to this report."

Macroeconomic Advisers Chairman Joel Prakken noted seasonal factors may have boosted the December numbers but said growth in employment was "comfortably into positive territory and seems to be accelerating."

On Tuesday, minutes from the Federal Reserve's December policy meeting showed the U.S. central bank felt the economy still needed help despite some signs of strength. There was little appetite to trim the Fed's $600 billion bond-buying plan, the minutes show.

Yet the strong ADP report could again ramp up the debate over Fed policy.

"You cannot ignore the strength of this report," Tom Porcelli, a U.S. economist at RBC Capital Markets. "With small business now beginning to start to ramp up hiring, it's safe to feel better about the labor backdrop."

(Reporting by Jonathan Spicer and the Reuters New York bureau, Editing by Chizu Nomiyama)

 

 
 
 
 
 
 
 
 
 
























 
 
 
 
 
 

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