When ADP reported this morning that the U.S. added 217,000 private sector jobs last month, it added more weight to the scale already tipping toward a national interest rate increase.
Odds are (and there are indeed odds on this) that the Federal Reserve will raise rates when it meets later this month. The Fed has been putting off a rate increase for the past few months, ever since the employment picture turned murky over the summer. After averaging 213,000 new monthly jobs in the first half of the year, the average in the third quarter dropped to 171,000.
Now, with two strong monthly ADP reports, and the expectation that Friday’s government report will show 200,000 new private and public sector jobs, analysts say the first interest rate increase in a decade is a near certainty.
The November National Employment Report, issued in partnership with Moody’s Analytics, not only significantly exceeded the 190,000 job growth economists were expecting, it also included an upward adjustment of 14,000 to October’s initial report of 182,000 new jobs.
“Job growth remains strong and steady. The current pace of job creation is twice that needed to absorb growth in the working age population,” said Mark Zandi, Moody’s chief economist. “The economy is fast approaching full employment and will be there no later than next summer.”
If he is correct, and there are enough signs to suggest his prediction could be, then recruiters are facing some of the most difficult recruiting conditions in years, if not ever.
That is indeed a bold statement. The evidence, though, points strongly in that direction.
- Nationally, the percentage of working age adults participating in the labor force has fallen to the lowest level since 1977.
- The unemployment rate has been coming down for several years and is now at 5 percent and may fall even lower, since new claims for unemployment continue to decline.
- Job growth, though slower this year than last, will still end the year significantly above 2 million.
- Jobs posted online, according to The Conference Board’s monthly counts, reached 5.7 million in November, the highest total since counting began in 2005.
- The Society for Human Resource Management’s recruiting difficulty index has climbed every month for the last 20 months.
There’s no guarantee, of course, these trends will continue. However, ADPs monthly reports show that the job growth engine is the nation’s smallest employers, those with fewer than 50 employees. Geographically dispersed and spread across all industries and including most, if not all, occupations, they tend to be less sensitive to global shocks and are unaffected by the demands of Wall Street.
Again in November, small employers lead the jobs increase, adding 81,000 new employees to their payrolls. Large employers, which ADP defines as those with more than 500 workers, added 74,000 new jobs.
The service sector accounted for 204,000 of the 217,000 new jobs. And every industry tracked by ADP showed an increase:
- Construction 16,000
- Manufacturing 6,000
- Trade/transportation/utilities 30,000
- Financial activities 9,000
- Professional/business services 59,000