ADP employment report smashes expectations

Private sector employment in the US rose a lot more than expected in January, according to the latest figures from ADP.

Employers added 246,000 jobs last month, beating forecasts for a more modest 165,000 increase. Meanwhile, private payroll gains for December were revised down to 151,000 from a 153,000 gain initially reported.

Small businesses with fewer than 50 employees accounted for 62,000 of the jobs added to the economy, while medium-sized businesses with between 50 and 499 staff added 102,000 jobs, and large businesses accounted for an extra 83,000.

The goods-producing sector added 46,000 jobs, while the services sector added 201,000.

Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, said: “The US labour market is hitting on all cylinders and we saw small and midsized businesses perform exceptionally well. Further analysis shows that services gains have rebounded from their tepid December pace, adding 201,000 jobs. The goods producers added 46,000 jobs, which is the strongest job growth that sector has seen in the last two years.”

Mark Zandi, chief economist of Moody’s Analytics said: “2017 got off to a strong start in the job market. Job growth is solid across most industries and company sizes. Even the energy sector is adding to payrolls again.”

Capital Economics said: “The ADP survey suggests that private sector employment increased by a very strong 246,000 in January, up from 151,000 in the final month of last year. At first glance, that is obviously good news, particularly as the ADP did a good job of forecasting the 156,000 gain in the official non-farm payroll measure of employment.

“That said, while the ADP was a good predictor of payrolls in December, it has a much spottier record over the longer term. Furthermore, in past years, January has proved to be a particularly problematic month because of the methodology used in the ADP survey. That survey simply counts the number of people on the payroll, regardless of whether they are paid or not. The issue is that some firms keep job leavers dormant on the payroll for the remainder of each year and then purge everyone who hasn’t actually worked or been paid for several months at the start of the next year.”

As of 1627 GMT, the yield on the benchmark 10-year US Treasury note was higher by five basis points to 2.50%.