Private US firms added 117,000 jobs in February, ADP said Wednesday.
I suppose this goes without saying, but relying on ADP as a “predictor” of the government’s monthly jobs report hasn’t been the best strategy over the course of the pandemic. January was yet another example. So, these prints now come stamped with a caveat. “Grains of salt” and so forth.
Versus consensus, 117,000 was a miss, and a fairly large one at that. The market was looking for 200,000. January was revised higher. (The scales on the visual, below, have been adjusted to “trim” the anomalous losses and gains in and around the first lockdowns last year).
The goods-producing sector shed 14,000 positions last month. That was completely accounted for by manufacturing. The 3,000 jobs lost in construction were offset by 3,000 gained in natural resources and mining.
In the services sector, 131,000 jobs came back, with the bulk concentrated in trade, transportation & utilities and education & heath. Leisure & hospitality managed just a 26,000 gain.
“With the pandemic still in the driver’s seat, the service sector remains well below its pre-pandemic levels,” Nela Richardson, ADP’s chief economist, said.
As for firm size, the gains were pretty evenly distributed, or at least when you break it down into three subgroups.
Divided into small- and mid-sized versus large shows the numbers skewed to the former for a sixth month.
Again, it’s difficult to know what to make of this. Trying to predict NFP with ADP hasn’t worked out very well, so perhaps a miss is a contrarian signal! I’m just kidding. Maybe.
Taken at face value, the data represents a lackluster read on the labor market, and suggests that regaining substantial momentum is a goal that remains several months out.
“The labor market continues to post a sluggish recovery across the board,” ADP’s Richardson went on to lament. “We’re seeing large-sized companies increasingly feeling the effects of COVID-19, while job growth in the goods producing sector pauses.”
Bottom line: There’s nothing here that points to the kind of services sector renaissance the economy needs to sustain a fundamentals-based recovery. And jobs in the goods-producing sector are disappearing too.
Re: Hobbled US Labor Market & grains of salt
In a somewhat related larger labor market macro picture, I ran across an interesting salt crystal, i.e., home prices in Japan are sort of falling — which connects to GDP-debt ratios, growth, productivity and labor trends related to demographics.
That’s even more interesting in terms of interest rates and jawboning the threat of hyper-inflation, as a global kneejerk reaction to pandemic stimulus, because, GDP has been stagnate for decades, as has labor market, wages, productivity, etc.
Perhaps a great re-structuring is under way, as technology trends have blasted some productivity higher, but the over labor market is still very much threatened by a surge in AI robotic growth, which will displace human job potential. Add on top of that, a drop in fertility rates, connected to the super peak period of Baby Boomer labor market drop-outs and we essentially have a very combustible future, after the great pandemic.
Although animal spirits may phase in as the pandemic phases out, that transition will be dramatically short, because sluggish growth will continue from the prior trend, then be accelerated by robotic efficiency and less spending from Boomers. This period today is a singularity — and I totally agree that ADP data is highly suspect.
Also see more suspect and highly distorted labor data: FRED has added 118 new series from Indeed, which calculates trends in job postings on Indeed.
FRED does have a good post, called — U.S. Population Growth Slowed Further in 2020 (here’s the conclusion):
“This year’s 0.35% growth rate reported in December 2020 was only about half of the 0.72% growth expected by the Census Bureau in April 2020, as seen in the figure below. The final estimate could rise above 0.35% as the decennial census and other field work is completed.
This matters for the economy because the potential labor force will grow more slowly in the future. This, in turn, may lower investment demand and interest rates, because there will be less need for new business equipment, housing and other capital goods to accommodate a slow-growing population and workforce.”
And, here’s an idea for a FRED chart:
https://fred.stlouisfed.org/graph/?g=ByA4
Appreciate your insightful and thought provoking comments. They add nicely to H’s work.