ADP reports January hiring surge
Warmer weather called factor after 291,000 workers added
Companies in the U.S. ramped up hiring at the start of the year, taking on the most workers since May 2015 and indicating the labor market remains robust, a report on private payrolls showed Wednesday.
Employment at businesses increased by 291,000 in January after a revised 199,000 gain in December, according to data from the ADP Research Institute. The surge in hiring, which partly reflected the benefits of warmer weather, exceeded all economists’ forecasts in a Bloomberg survey that called for a 157,000 gain. The dollar strengthened and Treasury yields rose after the report.
The larger-than-expected gain was broad-based and included the biggest advance in service industry payrolls since February 2016, including a record surge in hiring at leisure and hospitality companies in data back to 2002.
The ADP report showed goods-producing payrolls rose 54,000 in January, while service-provider employment increased 237,000.
The report is in line with last week’s statement from Federal Reserve policymakers after their meeting on interest rates. The Fed said that “job gains have been solid, on average, in recent months.”
Payrolls at small businesses increased by 94,000 last month, the most since July 2018, and rose 128,000 at medium-sized companies and 69,000 at large firms.
“Mild winter weather provided a significant boost to the January employment gain,” Mark Zandi, chief economist at Moody’s Analytics, said in a statement. Moody’s produces the report jointly with ADP.
He said without the weather’s impact, the January job gain would probably have been around 150,000.
The ADP report showed a gain of 47,000 construction jobs and an increase of 96,000 jobs in leisure and hospitality, two areas where the warmer weather probably played a role.
Manufacturing added 10,000 jobs in January while education was up 24,000 and and health care jobs rose by 47,000.
The ADP report is coming out ahead of the Labor Department’s release of the January jobs report on Friday. Many analysts expect that report will show a job gain of 150,000 last month, compared with 145,000 jobs in the government’s report in December. Analysts believe the unemployment rate will remain at a 50-year low of 3.5%.
The government figures Friday also will include annual revisions. In August, the Labor Department’s preliminary benchmark projections showed the number of workers added to payrolls will probably be revised down by 501,000 in the year through March 2019. ADP’s report follows a different methodology than the government’s, and the two do not directly correlate with each other.
ADP’s payroll data represents about 411,000 firms employing nearly 24 million workers in the U.S.
Zandi said a variety of factors from a deadly virus in China to Boeing’s shutdown of production of the troubled 737 Max jetliner will reduce growth in the first part of the year.
In a separate report, U.S. services companies grew at a slightly faster pace in January than the previous month, an indicator of continued steady expansion of the economy.
The Institute for Supply Management said Wednesday that its service-sector index edged up to 55.5 from 55 in December. Any reading above 50 signals an expansion. The index covers retail, health care, hotels and restaurants, and professional services, among other sectors.
Services companies added jobs at a slower pace last month than in December, while sales increased. Steady consumer spending, buttressed by a strong job market and decent pay gains, is driving a healthy service sector and broader economy.
A separate survey this week of manufacturers by the institute showed that U.S. factories expanded unexpectedly in January, snapping a fivemonth losing streak. New orders, production and export orders all grew last month, but the rebound was narrow. Only eight of 18 industries reported growth, led by furniture companies. And the outbreak of a new virus in China threatens the supply chains that manufacturers rely on.
The industries covered by the the institute’s services survey, by contrast, make up nearly 90% of the economy.
Details of the new report were mixed. New orders increased last month at a faster rate. Ten of the 18 U.S. services industries reported growth in January. Five industries reported an increase in new export orders, including agriculture, finance and health care. But the pace of new hiring slowed, with some companies reporting a continued substantial workforce shortage. And order backlogs shrank for the fourth straight month.
Trade tensions are weighing less on companies than in previous months, after the U.S. and China reached a preliminary trade agreement on Dec. 13. President Donald Trump signed it on Jan. 15.
Still, an emerging trade fight between the U.S. and the European Union over a tax on digital services, levied by France, could hurt exports of consulting and other services in the coming months. The U.S. is considering retaliatory tariffs in response to the tax, an action that could spark a new trade battle.
Concerns have emerged over the viral outbreak in China. Some services companies reported they were closely monitoring developments, watching for the potential impact on medical supplies like surgical masks, for example.
Anthony Nieves, chairman of the institute’s services survey committee, said the coronavirus’ impact on service businesses should be minimal if it is able to be contained from reaching pandemic levels. “Unless it really gets out of control, we’ll be fine next month,” he said.
Overall, the January report shows “a continued path for sustained growth” in the services sector, Nieves said.