US private sector adds more jobs than expected in December - ADP

Employers added 271,000 jobs last month compared to a 179,000 gain in November, beating expectations for a 178,000 increase and marking the biggest increase in nearly two years.

Small businesses with fewer than 50 employees added 89,000 jobs, while medium-sized businesses with between 50 and 499 members of staff added 129,000 and large businesses of 500 employees or more created 54,000 jobs.

The goods-producing sector added 47,000 jobs to the economy, while the services sector created an additional 224,000 jobs, with professional/business services contributing the largest chunk at 66,000.

Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, said: "We wrapped up 2018 with another month of significant growth in the labour market. Although there were increases in most sectors, the busy holiday season greatly impacted both trade and leisure and hospitality. Small businesses also experienced their strongest month of job growth all year."

Mark Zandi, chief economist of Moody’s Analytics, said: "Businesses continue to add aggressively to their payrolls despite the stock market slump and the trade war. Favourable December weather also helped lift the job market. At the current pace of job growth, low unemployment will get even lower."

Pantheon Macroeconomics said: "To describe this as startling would be something of an understatement. The biggest increase in the ADP measure of private employment since February last year came out of the blue; the upper boundary of our model was only 220K, with a mid-point at 170K. This reading is consistent, though, with our composite index of private sector leading indicators of the pace of hiring, but this follows a year-and-a-half of undershoots.

"We don’t know what prompted the sudden closing of the gap in December. It might reflect a catch-up after months of distortions caused by hurricanes Florence and Michael, the California wildfires and the unseasonable cold November weather, or it might just be noise. Typically, ADP tends to undershoot the official numbers in months after weather events - November’s survey week was the coldest since 1997, at least - but we’d be very surprised by a 300K-plus reading tomorrow.

"We’re sticking to our 225K forecast, but the risk now is to the upside; consensus for the official number, ahead of the ADP report, was only 180K. We can’t imagine that 271K gains are remotely sustainable, but this report comes as a welcome jolt to the market’s favored narrative that the economy is slowing sharply."