ADP Employment Report: Modest Job Growth in January

Private sector jobs increased by a modest 187,000 in January, according to this morning’s release of the ADP Employment Report. That’s a sharp slowdown from December’s 297,000 surge, which has since been revised down to 247,000.

“This month’s ADP National Employment Report suggests solid growth of private nonfarm payroll employment heading into the New Year,” according to the press release. “The recent pattern of rising employment gains since the middle of last year appears to be intact, as the average gain over December and January (217,000) is well above the average gain over the prior six months (52,000). Strength was evident within all major industries and across all size business tracked in the ADP Report.”

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ADP's characterization of the labor market's revival is a bit too rosy given the modest numbers, but everyone's entitled to their opinion, especially when it comes to the uncertainty of the future. As to the past, all is clear, and by that standard it's hard to get overly excited at this point. The economy is creating new jobs, of course, and the trend almost certainly has legs. But so far, there's not much evidence indicating that the gains will soon be sufficient to attack public enemy No. 1 in economic policy matters: High unemployment.

The latest data point from ADP suggests that this Friday’s employment report from the Labor Department won’t deliver any large positive surprises. Of course, history also suggests that we should be cautious in reading too much into ADP estimates as a window into the more influential government payrolls report. Maybe that's a good thing. Last month, the initial ADP update revealed a strong revival in job creation for December, but the enthusiasm for thinking that the labor market had finally turned a corner fizzled a few days later when the official payrolls report for December threw cold water on the idea.

Even if you take today’s ADP report at face value, it’s unimpressive, given what the economy needs to lower the elevated 9%-plus unemployment rate. “Until we start seeing job gains above 250,000, these will just be stabilizing reports rather than true indications that the market will meaningfully come back,” says Michael Yoshikami, chief investment strategist at YCMNET Advisors.