January 2016 ADP Job Growth At 205,000 – Above Expectations

ADP reported non-farm private jobs growth at 205,000. The rolling averages of year-over-year jobs growth rate remains strong but the rate of growth continues in a downtrend (although insignificant again this month).

The market expected 160,000 to 219,000 (consensus 190,000) versus the 205,000 reported. These numbers are all seasonally adjusted;

In Econintersect‘s January 2016 economic forecast released in late December, we estimated non-farm private payroll growth at 110,000 (based on economic potential) and 170,000 (fudged based on current overrun of economic potential);

This month, ADP’s analysis is that small and medium sized business created 78 % of all jobs;

Manufacturing jobs grew by zero.

94 % of the jobs growth came from the service sector;

December report (last month), which reported job gains of 257,000 was revised up to 267,000;

The three month rolling average of year-over-year job growth rate has been slowing declining since February 2015 – it is now 2.00% (statistically unchanged from last month’s 2.02%)

ADP changed their methodology starting with their October 2012 report, and ADP’s real time estimates are currently worse than the BLS.

Per Mark Zandi, chief economist of Moody’s Analytics:

Job growth remains strong despite the turmoil in the global economy and financial markets. Manufacturers and energy companies are reducing payrolls, but job gains across all other industries remain robust. The U.S. economy remains on track to return to full employment by mid-year

Per Ahu Yildirmaz, VP and head of the ADP Research Institute.

One of the main reasons for lower overall employment gains in January was the drop off in jobs added at the largest companies compared to December. These businesses are more sensitive to current economic conditions than small and mid-sized companie. Over the past year, businesses with less than 500 employees have created nearly 80 percent of new jobs.

Jobs growth of 150,000 or more is calculated by Econintersect to the minimum jobs growth to support population growth (see caveats below). The graph below shows ADP employment gains by month. A graph in the caveats section below compares ADP employment to BLS.

Employment is a rear view indicator, and looking at this ADP data – the overall trend for the year-over-year rate of growth has been flat since mid-2010. (red line in graph below).

ADP Non-Farm Private Employment – Total (blue line) and Year-over-Year Change (red line)