Job Growth Expected to Again Exceed 200,000

More eyes than usual will be watching for the U.S. Labor Department’s monthly employment report tomorrow.

The first Friday of the month (with rare exceptions) is when the department’s Bureau of Labor Statistics releases its initial snapshot of employment and unemployment statistics; a report that moves the global financial markets and influences national policy.

Economists predict the report will show non-farm employment increased in September by 203,000 to 206,000 jobs and that unemployment remained flat for the second month at 5.1 percent. That forecast — the average of estimates from multiple economists — was buoyed Wednesday when HR services and payroll process ADP said the economy added 200,000 private sector jobs last month.

ADP report Sept 2015Though the ADP National Employment Report frequently differs from the Labor Department numbers, it’s viewed as an indicator of what the official report will show.

“Businesses with more than 1,000 employees contributed over half of the job gains in September, despite weakness in energy and manufacturing,” said Ahu Yildirmaz, VP and head of the ADP Research Institute. “The largest companies appear to be starting to overcome the impacts of weak global demand and the high dollar, while the smallest companies may have pulled back as concerns about the resiliency of the U.S. economy grew and consumer confidence softened.”

That large employers were the growth engine in September is a dramatic reversal from the last several years. Since the recovery began, small- and mid-sized employers (as defined by ADP) have added the large majority — sometimes accounting for all — of the monthly job increases. In the entire nearly 11-year history of the ADP report, employers of 500 or more workers have never added more than 92,000 workers and usually far less.

Until September.

ADP and its partner Moody’s Analytics said the largest employers increased their payrolls last month by 106,000 new workers. The smallest employers (fewer than 50 workers) added 37,000 employees. That’s the fewest in almost two years. Employers of 50-499 workers added 56,000 new jobs.

Of the five industry sectors tracked by ADP, only manufacturing lost jobs, cutting 15,000. But construction more than made up for the loss, adding 35,000 new jobs in the month, the most since 2006. The other three sectors and their job growth:

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  • Trade/transportation/utilities 39,000
  • Financial activities 15,000
  • Professional/business services 29,000

Mark Zandi, chief economist of Moody’s Analytics, said, “The U.S. job machine continues to produce jobs at a strong and consistent pace. Despite job losses in the energy and manufacturing industries, the economy is creating close to 200,000 jobs per month. At this pace full employment is fast approaching.”

That’s the kind of evidence the Federal Reserve has been watching for. Last month, the Fed held off on raising interest rates. The global financial markets were roiled by reports of slowdowns in China’s economy and other signs suggesting weaknesses elsewhere. When the August jobs report came in at a low 173,000 new jobs, the Fed decided to wait to see what another month would bring.

While other factors weigh in the Fed’s decision, economists and investors have looked to the monthly jobs report as a sort of augur of when a rate hike would come. Strong employment and increasing average hourly pay could prompt the Fed to act. Slower employment and flat pay increases could lead the Fed’s Board of Governors to wait.

Short of a complete upset when the BLS releases September’s numbers tomorrow morning, the Fed is expected to announce at the end of the month the first increase in interest rates since before the recession.

 

John Zappe is the editor of TLNT.com and a contributing editor of ERE.net. John was a newspaper reporter and editor until his geek gene lead him to launch his first website in 1994. He developed and managed online newspaper employment sites and sold advertising services to recruiters and employers. Before joining ERE Media in 2006, John was a senior consultant and analyst with Advanced Interactive Media and previously was Vice President of Digital Media for the Los Angeles Newspaper Group.

Besides writing for ERE, John consults with staffing firms and employment agencies, providing content and managing their social media programs. He also works with organizations and businesses to assist with audience development and marketing. In his spare time  he can be found hiking in the California mountains or competing in canine agility and obedience competitions.

You can contact him here.

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