Private sector employers in the US added twice as many jobs as expected in December, an ostensibly encouraging prelude to Friday’s government report.
The headline ADP print showed an 807,000 gain, a mile above the most optimistic estimate from 28 economists who ventured a guess. The range was 300,0000 to 600,000.
The huge beat to consensus (figure below) comes with the usual caveat: ADP hasn’t been the best predictor of NFP in the pandemic era.
The prior two months were revised slightly lower.
The breakdown shows gains concentrated in large businesses, but there were sizable additions in small- and mid-sized firms as well.
Encouragingly considering worries about the impact of the Omicron variant on services sector hiring, leisure and hospitality added nearly a quarter million positions, the most since July (figure below).
That gain took the sector closer to pre-pandemic levels, but it’s the same story: “Close” is a relative term. There’s still quite a bit of ground to make up.
To recapitulate, one of the more notable takeaways (especially considering the data was collected prior to the Omicron tsunami) was a complete loss of momentum in leisure and hospitality in November’s NFP report. The sector added just 23,000 jobs in November, the worst showing since January 2021. Hopefully, Wednesday’s ADP figures presage a rebound, but it isn’t clear the impact of the variant is captured by the numbers.
Notably, manufacturing added 74,000 jobs (figure below).
That’s consistent with the uptick on ISM manufacturing’s employment gauge for last month.
Overall, the gain in the goods producing sector was the largest of 2021, good news considering a mismatch between the supply of goods and robust demand is a big part of the inflation story.
All in all, it was hard to paint December ADP as anything other than a solid read on the US labor market. The obvious caveat is that the data may not tell the whole story. The full effect of Omicron’s unfathomable spread probably won’t show up until January’s labor market reports.
“December’s job market strengthened as the fallout from the Delta variant faded and Omicron’s impact had yet to be seen,” Nela Richardson, ADP’s chief economist said Wednesday. “December’s job growth brought the fourth quarter average to 625,000, surpassing the 514,000 average for the year,” Richardson added.
Of course, every update on the jobs market ends on a downbeat note. ADP employment is still four million short of pre-pandemic levels.
