ADP Says Economy Job Growth Gaining Momentum

Mar 30, 2011
This article is part of a series called News & Trends.

Payroll processor ADP reported this morning that the U.S. added 201,000 private sector jobs in March, an estimate that bolsters expectations that Friday’s government jobs count will show an equally positive increase in hiring.

The estimate, based on payroll data from ADP’s half-million employer clients, is slightly lower than the 205,000 average of economists’ predictions. However, it is the second consecutive month of 200,000-plus private sector job gains, even after accounting for the downward adjustment in February’s job count from the initial 217,000 to 208,000.

The National Employment Report from ADP and its partner Macroeconomic Advisers says most of the hiring came from small and mid-sized businesses, which cumulatively added 184,000 jobs.

The service sector added 164,000 jobs in March, while manufacturing and goods producing businesses added 37,000 jobs each.

While economists and investors consider the ADP numbers a sort of bell cow for the official U.S. Labor Department employment report typically released the first Friday of each month, the data doesn’t always track well. Part of the explanation is that the report from U.S.  Bureau of Labor Statistics includes government jobs. For months, now, that sector has been laying off workers.

Still, it’s a valuable indicator of employment trends. Alan Ruskin, an economist with Deutsche Bank, told The Wall Street Journal:

OK nobody is going to get too excited about a number that has proved such a poor indicator of employment changes in recent months, but the 3-month average of ADP has been above 200K for 2 months which is a comparatively rare event. This ‘feat’ was achieved only once in the prior recovery back in 2004, when the 3m average was above 200K for only 2 months.

Economists expect that Friday’s report will show employers added about 190,000 jobs in March, even as the unemployment rate inched up to 9 percent. February’s decline in the rate — from 9.0 percent to 8.9 percent — is considered a statistical aberration by many.

Whatever the numbers turn out to be, it’s now almost unarguable that the U.S. economy is growing jobs again, and that the momentum is picking up.

Note my use of “almost.” Residential construction and housing prices are stalled or down, and the Conference Board said yesterday that consumer confidence took a beating in the month, dropping from 72 to 63.4. There are other indices and measures that show similar ups and downs. But overall, the evidence is that employment is growing.

The Conference Board’s Employment Trends Index was up in February for the fifth month in a row. The Index is a combination of multiple other indices, which, taken together, smooth out bumps in any one of them. Meanwhile, its Help Wanted OnLine report said 208,000 more jobs were advertised online in March than in February. Since December, the number of advertised openings has grown by 600,000.

That’s consistent with SHRM’s most recent LINE report. The recruiting difficulty indices for both manufacturing and service sector hiring took double digit increases in February compared to February 2010. However, the LINE report predicted service sector hiring would be down in March, on a year-over-year basis, while manufacturing would be up.

Friday’s BLS report will show how accurate those predictions were. The ADP report suggests hiring was up across the board.

Meanwhile, Challenger, Gray & Christmas said today that employers announced 18 percent fewer layoffs in March than in February. On a year-over-year basis, announced layoffs are down 39 percent. Says the global outplacement consultancy:

Overall, employers have announced 130,749 job cuts through the first quarter, 28 percent fewer than the 181,183 planned layoffs announced in the same period of 2010.  The three-month tally is, in fact, the lowest first-quarter total since 1995, when employers announced 97,716 job cuts from January through March.

The largest share — 46 percent — of the 41,528 layoffs the consultancy tracked during the month came from government.

This article is part of a series called News & Trends.
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