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Jobs Picture Improves in December, ADP Report Says

(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, […]

Written By: Channel Insider Staff

Jan 5, 2011

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(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)

Jobs Picture Improves in December, ADP Report Says

Channel Insider Staff

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