Payroll giant ADP reported Thursday that private sector employment increased by 215,000 jobs from November to December, driven in part by construction jobs in the wake of Hurricane Sandy.
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ADP also revised upward its November 2012 report by 30,000 jobs, increasing the reported job gains from 118,000 to 148,000 jobs (see ADP Sees Private Sector Adding 118,000 Jobs in November).
The December report found that small businesses added 25,000 jobs. That total was broken out into two subgroups. Small businesses with 1 to 19 employees lost 6,000 jobs, but those job losses were offset by small businesses with 20 to 49 employees, which gained 31,000 jobs.
Medium-size businesses with 50 to 499 employees gained 102,000 jobs. Large businesses added 87,000 jobs, including 26,000 jobs at businesses with 500 to 999 employees, and 61,000 jobs at larger businesses with 1,000 employees or more.
Among businesses of all sizes, the goods-producing sector added 28,000 jobs, while the service-providing sector added 187,000.
The strongest industry gains came in the construction industry, which added 39,000 jobs in December in the wake of Hurricane Sandy. The trade, transportation and utilities industry, which ADP groups together with its partner, Moody Analytics, added 53,000 jobs. The financial activities sector added 14,000 jobs, while professional and business services gained 37,000 jobs. Job losses occurred in the manufacturing industry, which declined by 11,000 jobs.
“It was a solid report,” said Mark Zandi, chief economist of Moody’s Analytics, during a conference call with reporters Thursday. “Over 200,0000 jobs were created in the month of December. That’s about the trend of job creation we’ve been getting over the past couple of years of about 150,000 per month, so that’s very positive. The job gains were broad based. The only major industry to lose jobs in the month was manufacturing, which continues a string of job losses that manufacturing has suffered since the summer. But outside of that, the job gains have been broad based across industry, and they’re also relatively broad based across the size of industry, although larger companies continue to do better than smaller companies.”
Among small businesses, the goods-producing sector added 7,000 jobs, including 2,000 at small businesses with 1 to 19 employees and 5,000 at businesses with 20 to 49 employees. Small businesses in the service-providing sector added 18,000 jobs, with 26,000 jobs gained at businesses with 20 to 49 employees, partially offset by 8,000 jobs lost in the service-providing sector.
The job gains in December came despite the uncertainty over the outcome of the fiscal cliff negotiations in Congress, with tax cuts and tax rates hanging in the balance.
“I think the most important fundamental point that comes out of the report and the data is that the fiscal cliff debate—the brinkmanship over that and the uncertainty that was created by the fiscal cliff—does not seem to have done any significant damage to the job market,” said Zandi. “One could argue that we’d be seeing more job creation at this point if we weren’t in the middle of these difficult fiscal decisions, but it doesn’t appear that they are weakening economic growth, which is very positive because clearly there’s more fiscal debate to come as policymakers try to figure out how to agree to make some spending cuts and tax reform perhaps and raise the Treasury debt ceiling. There’s more brinkmanship to come, and hopefully the job market will be able to hang together as well as it has over the past several months.”
Paradoxically businesses seem to have pulled back on their investment spending even while they have continued hiring. “It’s a bit perplexing that we haven’t seen some weakness in the job market, while we have seen weakness in investment spending,” said Zandi.
The construction industry received a bounce in hiring from the devastating impact in the Northeast of Hurricane Sandy.
“You can see it in the regional data for New York and New Jersey,” said Zandi. He anticipates much stronger construction activity in the next several years, especially residential but also commercial construction, as well as improvement in construction-related activities in the manufacturing, wholesale, retail, transportation, distribution and financial services sectors. “This is a very positive development that I think will continue as we move on into 2013, 2014 and 2015,” said Zandi.
Despite the job gains of 215,000 in December, Zandi cautioned that the job creation trend has not improved significantly in recent months. Employers have been adding about 150,000 jobs a month fairly consistently over the past couple of years. “I don’t think we’re out of the woods yet,” he said. “I think we’re going to be stuck around that 150,000 per month payroll gain for at least the next two or three months, and it won’t be until the other side of the Treasury debt ceiling that we’ll start to see stronger job growth on a consistent basis.”
Zandi noted that small businesses have continued to struggle during the recovery. “The biggest companies of over 1,000 employees have done really well, but the smallest companies have really lagged relative to their size and how they performed in past recoveries,” he said.