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ADP Posts Blowout 298K New Jobs

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Wednesday, March 8, 2017

In the highest monthly private payroll read we’ve seen in more than 2 years, ADP (ADP - Free Report) posted 298K jobs in the month of February — a full 100K higher than the 188K expected by analysts. Not only that, but January’s strong ADP number was revised upward 15K to 261K, marking the strongest 2 private-sector jobs numbers we’ve seen in awhile.

Services itself consisted of 198K new jobs last month, but the real surprise was Goods producing jobs in triple digits at 106K. Of these, Manufacturing employment rose by 32K in February. While this may not be as impressive as the 66K Professional/Business sector jobs growth (Construction also brought in 66K for the month), keep in mind that Goods and Manufacturing reads have been so low over the past multi-year wave of job growth, they’d actually registered in the negative several times. That headwind looks to be over, which is good for the U.S. economy and good for President Trump.

According to Mark Zandi on CNBC this morning, 198K new private sector jobs amounts to 3 times the rate of job growth to absorb the growth of the working-age population. Medium-sized companies (50-499 employees) led the way with 122K new hires for the month, followed by Small companies at 104K and Large firms hiring an additional 72K.

Of course, this even further ratchets up the possibility of an interest rate hike from the Fed next week. Prior to this exemplary private sector jobs read, the likelihood of a 25-basis point hike was already north of 80%; look for this possibility to reach slam-dunk expectations as the day progresses.

And, of course, the ADP report is basically a primer for the end of the week’s Bureau of Labor Statistics’ (BLS) non-farm payroll report, which accounts for the entire U.S. labor market, including government sector jobs (which may now turn negative under the Trump administration). ADP’s estimate for the BLS total is 197K, still on the high-range historically, especially with the unemployment rate sub-5% for awhile now. That figure suggests near-full employment, although part-time work like Uber drivers are sopping up much of this excess.

What we’ll look for beneath the headline number Friday is wage growth, which had been stagnant even among the impressive gains in jobs through most of the Obama administration. Should wages be on a notable incline, this will be another factor strengthening the underlying jobs market. And for sure the Fed Presidents will take note of this ahead of next week’s meeting, as well.

Mark Vickery
Senior Editor

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