This morning’s ADP (ADP) jobs report is in line with the recent trend of weakening economic momentum — the data is still strong, but it is nevertheless a tad bit on the weak side.
The ADP read came in slightly below estimates at 213K for January vs. estimates of about 220K, while the prior month’s tally was revised higher (253K vs. 241). This the 10th month running that the monthly tally on the ADP report has exceeded 200K.
The consensus expectation for Friday’s BLS report is for ‘headline’ gains of 230K, which includes government jobs, that have been averaging 5K to 10K monthly. As such, today’s ADP report wouldn’t have much bearing on current BLS estimates, though the two reports can diverge from each other in a big way at times.
Today’s ADP report showed broad-based gains, with small businesses adding 78K jobs, medium-sized businesses adding 95K and large businesses adding 40K. The Goods-Producing sector added 31K jobs in January, with Construction adding 18K and Manufacturing adding 14K jobs for the month. The Service sector added 183K in January, with the Trade, Transportation and Utilities category adding 54K. The Professional and Business Services groups produced 42K jobs.
This is a strong report – a tad bit weaker than expected and showing some loss of momentum from the last few months, but nevertheless showing strength. The modest loss of momentum in today’s report – January’s 213K number follows December’s 253K and November’s 274K tallies – is in-line with other recent economic readings showing similar trends. The factor sector ISM survey, the Durable Goods reading and even the Q4 GDP read all showed some loss of momentum from what we had been seeing earlier.
The most likely interpretation for this trend is that growth is stabilizing after a couple of quarters of break-neck speed. That said, one could interpret this trend also as the weak global economy bringing down the U.S. growth picture. The recent uptrend in oil prices and momentum in the stock market indicates that investors aren’t concerned about the economic growth backdrop.
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