Private-sector employers added 192,000 jobs in January, according to payroll processing firm ADP. That's an increase over the 168,000 private jobs that businesses added in December, according to the Labor Department. The positive ADP report may bode well for January's jobs report, which the government will release Friday morning.
The report reflects growth across a variety of industries, led by professional and business services, a category that includes a variety of occupations like advertisers and bookkeepers, which added 40,000 jobs. The trade, transportation, and utilities category also saw strong growth, adding 33,000 jobs. Construction also added a strong 15,000 jobs, indicating that the industry may be recovering from the long-standing post-recession housing slump.
The ADP estimate seems to indicate further healing in the job market. The government's December jobs report showed businesses added an estimated 155,000 jobs in December.
"Job growth has accelerated, and underlying job growth currently feels like it's about 175,000 per month. ... I think that's actually enough to allow for a steadily declining unemployment rate," said Mark Zandi, chief economist with Moody's Analytics, which co-produces the report with ADP, in a call with reporters this morning. He said that at this rate, the unemployment rate could fall from its current 7.8 percent level to 7.3 percent by the end of the year and below 7 percent in early 2014.
Still, despite ADP's solid job growth estimate, there is plenty of reason to foresee soft jobs numbers not just for Friday's report but for those in months to come. One is that ADP's count does not include government employment, which has generally been on the decline since early 2009 (early-2010 Census hiring aside). Indeed, the latest GDP report from the Commerce Department reflected a major cut in Defense spending, and with deficit-reduction a top priority in Washington, that could mean further declines in public-sector employment. Government spending cuts are looming on the horizon, with deep so-called sequestration cuts scheduled for March 1. Whether via those cuts or a deal reached by Congress to avoid those cuts, it could mean declines in federal spending. That would mean that public-sector cutbacks could drag down monthly employment counts for months to come.
In addition, the end to the payroll tax cut could hurt private businesses in months to come, as American workers spend less in response to smaller paychecks.
It's also important to remember that ADP's estimate, which comes out just before the government's estimate every month, is an imperfect indicator of government job counts. While ADP's figures generally correlate closely with Labor Department numbers, the numbers are subject to revision. Last month, the firm initially estimated December private-sector job growth at 215,000, which it has now revised down to 185,000—much closer to the official Labor Department estimate. That figure, however,is itself subject to further revision as the Labor Department receives further information from establishments.