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ADP Reports Historic Jobs Growth Continues; Plus GM, HMC Deal

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Wednesday, October 3, 2018

We see another great big jobs number this morning from the monthly Automatic Data Processing (ADP - Free Report) private-sector payroll report: 230K new jobs were created (non-government) in the month of September, way up from the 185K estimated by analysts. This is also a significant climb from the 168K reported for August, which itself was upwardly revised by 5000 new positions.

Medium-sized companies (50-499 employees) continued to lead the way with 99K new hires last month, with large companies outperforming small ones, 75K to 56K. Firms with fewer than 50 employees are having the toughest time hiring skilled workers for their still-open positions, which has been the narrative for the past few reads. That’s good news for larger companies, who have additional incentives on offer — including increasing wages, as we saw just this week with Amazon (AMZN - Free Report) raising its minimum wage to $15 per share.

Typically, Services jobs outpaced Goods-producing jobs by more than 3-to-1, 184K to 46K. Still, with 34K new jobs in Construction and 7K more for Manufacturing, even non-service-related employment is enjoying boom times. Education/Healthcare topped the field once again with 44K new jobs, Trade/Transportation reached 30K and Leisure/Hospitality hired 16K more individuals last month.

These ADP numbers do not reflect the damage done to the labor market from Hurricane Florence, which ravaged the Carolina coast this September. For the ADP report, just being on a company’s payroll gets you counted, regardless whether or not you actually earned a paycheck during that time. As such, this 230K headline may be a little rich when we compare it to Friday’s non-farm payroll report from the Bureau of Labor Statistics (BLS).

Speaking of the BLS report this week, estimates are currently for 180K new jobs, even factoring in the hurricane damage (although no one yet knows for sure how far-reaching Florence affected the Carolina workforce). This is still roughly double the amount of monthly jobs required to grow the domestic labor force further, meaning this historically strong employment in the U.S. just continues to tighten. Growth in average hourly wages will once again be checked closely. The headline Unemployment Rate may be expected to tick down again from the 3.9% reported for August.

As a result, pre-market indexes are very favorable, with the Dow up an additional 130 points from yesterday’s all-time record close. As jobs numbers — brought about largely by the slashing of corporate tax rates at the beginning of this year — continue to drive this historically strong economy and stock market, for now we can sit back and enjoy the ride.

Honda Invests in GM’s Autonomous Vehicles

Speaking of enjoying the ride, we see news this morning in the auto industry: Honda Motor Corp. (HMC - Free Report) has agreed to invest in General Motors’ (GM - Free Report) GM Cruise business, its autonomous vehicle segment of the auto-making conglomerate. Honda plans to invest $2.8 billion over the next 12 years in a partnership with GM, starting with an initial amount of $750 million, and which will bring Honda’s stake in GM Cruise to 5.7%. GM Cruise is now estimated to be worth $14.6 billion.

The main idea behind the cooperation reportedly is the development of shipping fleet expediency on a worldwide scale. These shared-use vehicles would create an automated road shipping industry. No release date has yet been set, but reports are these vehicles will be developed at its GM plant. Shares of GM are up 5% in this morning’s pre-market, while Honda’s stock has dipped about 1.8%.

Mark Vickery
Senior Editor

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