ADP Jobs Report Disappoints

Construction and manufacturing posted disappointing declines in employment.

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The private sector added 119,000 jobs in April, according to estimates from payroll processing firm ADP. The figure comes as a disappointment, as consensus estimates had been 40 to 50,000 jobs higher.

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"I would say it was a surprisingly weak number, a disappointingly weak number," says Joel Prakken, chairman of Macroeconomic Advisers, an economic research firm. "I think this number is going to cause some excitement. It likely will fuel speculation that the economy has downshifted."

The figure does not bode well for Friday's Labor Department jobs report. Consensus estimates for that figure are also around 170,000, and the ADP figure often tracks closely with government figures. In addition, the report shows disappointing job losses in two areas working to climb out of the hole dug by the recession. Construction lost 5,000 jobs last month, the first decline in seven months, and manufacturing employment also fell by 5,000 jobs, that industry's first decline since September.

Prakken says that the surprising dip in payroll growth still will not spur his firm to downgrade its forecasts for 2012 growth, for several reasons. One is that he is convinced that the warm late-winter weather is at least partly responsible for recent sluggish job growth.

"There is, I think, a fairly substantial body of evidence now generated by [Wall] street analysts, and also we've done some of this ourselves, to suggest that during the winter months private employment was boosted by perhaps a much as 70,000 cumulatively, as we had three warm months in a row," he says, meaning that the nation can expect a couple of months of payback for that early growth. "It would be natural that in the spring that excess would bleed off."

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Prakken also adds that employment is "more of a lagging than a leading indicator"—that is, that this jobs figure reflects an economy that decelerated substantially last quarter, to a growth rate of 2.2 percent. He also notes that a pullback in government spending was a major contributor to that figure, while personal consumption spending remained high, signaling that consumers are still confident enough to open their wallets.

Indeed, not all signs point to a disappointing Friday jobs report. Gallup reported this morning that its April Job Creation Index is near a four-year high, at +20. That figure reflects the difference between the percentage of workers saying their employers are hiring (36 percent) and those who say their employers are shedding workers (16 percent).

Gallup is still cautious, though. Noting the likely effect of warmer weather on recent job figures, Gallup's Chief Economist Dennis Jacobe writes, "Of course, the greater question is whether the improvement in job creation is more indicative of past reductions in the unemployment rate or of further declines yet to come."

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In order to see meaningful job growth, employers will need to add workers at a rate above and beyond even the promising growth the nation saw over the winter, when payrolls grew by more than 200,000 employees per month. In Prakken's opinion, the U.S. will need to see months of job gains exceeding 300,000 or even reaching 400,000 in order to fuel a healthy labor market.

Danielle Kurtzleben is a business and economics reporter for U.S. News & World Report. Connect with her on Twitter at @titonka or via e-mail at dkurtzleben@usnews.com.