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ADP Leaps Higher: 807K Highest Since May

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Wednesday, January 5, 2022

The final private-sector payroll report of 2021 from Automatic Data Processing (ADP - Free Report) is out this morning, with a whopping 807K new private-sector jobs having been created in the month of December. This is more than double the expected 375K, and well ahead of the downwardly revised 505K reported for November. This is the single-highest month for private-sector jobs since the 882K we saw for May of last year.

Goods-producing companies put in a strong effort, growing +138K, with +74K coming from the Manufacturing sector. But the real payoff came from Services: +669K is a huge amount of job gains in one sector in a single month, private-sector or not. This was led by Leisure & Hospitality — which includes hotels, restaurants, drinking establishment, amusement parks, etc. — with +246K new positions filled in December.

A headline of 807K is nearly twice as high as current estimates for Friday’s non-farm payroll report (including non-private employment) from the U.S. Bureau of Labor Statistics (BLS), which is currently expected to come in at 422K. If you remember back a month, you’ll recall the wide disparity between ADP and BLS figures for November — 534K vs. 210K, respectively — which is about as big a discrepancy as we’re likely to see on these monthly labor force prints. So there’s no guarantee the BLS will show as strong a headline number as ADP. But the question then would be: where did all these BLS jobs go?

Large companies (more than 500 employees) hired the most amount of private-sector workers for the month, +389K, no doubt enticing prospects with not only higher wages but often better incentives: healthcare, stock-based compensation, etc. Medium-sized companies (50-499 employees) brought in +214K, while small firms showed 204K — which would be a strong number for any month you might choose. Transportation-Trade-Utilities gained +138K, Professional/Business Services +130K and Education/Healthcare +85K — all very strong figures for a single month of new job adds.

If there is a note of caution here, it is the Omicron factor: this ADP data came in prior to the most recent blowup of new Covid cases with the Omicron variant, which is likely to gouge these extraordinarily good employment numbers for January. Whether that portends something more dire for the labor force depends on the longevity of the Omicron wave, or perhaps whether it gives way to yet another variant down the road. If it doesn’t — which many doctors are cautiously optimistic about at present — then we’ll consider whatever downturn next month’s employment numbers have as a temporary blip on the screen.

Pre-market indexes are in the red this morning, based partly on the Omicron headlines and Chinese government crackdowns on companies trading in U.S. markets. But since this boffo ADP report was released, those losses have been trimmed somewhat. Yesterday showed a clear fork in the road: growth/tech sold off (Nasdaq) while cyclicals (Dow) gained. Later today, Markit Services PMI is expected to come in at 57.3, representing moderating growth month over month.

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