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First Cut: ADP National Employment Report surprises to the upside for January

The ADP National Employment Report said there were 208,000 private jobs added in January, below the revised 263,000 in December (previously 271,000). However, the level was not materially different from the average of 205,000 for 2018 as a whole. The underlying pace of gains in private payrolls remained reasonably steady in January.

If there was a surprise, it was in the rebound of hires for the goods-producing sector at up 68,000 in January from 44,000 in December and 28,000 in November.  It was the largest increase since 70,000 in February 2018 and suggested that manufacturers have shrugged off concerns about slower economic activity and trade policy in the effort to ensure they have sufficient skilled workers to meet demand.

The service sector added 145,000 jobs in January, a relative low level of payroll increases in non-manufacturing. Some of this may be due to the government shutdown and non-payment of some contracts during that period. It may also reflect a natural pause after the huge increase of 219,000 in the prior month. In any case, it is still a healthy reading in the context of the last few years and a tight labor market.

While the ADP number does usually match up with the BLS data, it does usually give a strong hint as to the direction of the government numbers. The January Employment Situation for January at 8:30 ET on Friday. It indicates that the median market estimate of about 160,000 for private payrolls is probably not far off the mark, while the median estimate for manufacturing payrolls of about 15,000 could be low.

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