Private sector employers added 190,000 jobs in November, according to payroll giant ADP, as the economy continues to strengthen.
Small businesses added 50,000 jobs in November, including 14,000 at businesses with between one and 19 employees, and 36,000 at businesses with between 20 and 49 employees.
Midsized businesses with between 50 and 499 employees added 99,000 jobs. Large businesses gained 41,000 jobs, including 10,000 at companies with between 500 and 999 employees and 31,000 at larger organizations with 1,000 employees or more.
The service sector added 155,000 jobs, including 47,000 in professional and business services, which includes accounting, tax preparation and other services. The goods-producing sector added 36,000 jobs. Franchise jobs increased by 28,300.
“The labor market continues to grow at a solid pace,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, in a statement. “Notably, manufacturing added the most jobs the industry has seen all year. As the labor market continues to tighten and wages increase it will become increasingly difficult for employers to attract and retain skilled talent.”
Mark Zandi, chief economist of Moody's Analytics, which compiles the monthly national employment report with ADP, noted that the job market is “red hot.” With an unemployment rate of 4.1 percent and 8.3 percent for underemployment, it could be beyond what economists refer to as full employment. He predicted the unemployment rate will dip below 4 percent in 2018. The only soft spots are in industries being disrupted by technology, such as brick-and-mortar retailing. “There is a mounting threat that the job market will overheat next year,” he added.
The construction industry was also affected by the recent hurricanes, he noted during a conference call with reporters Wednesday, although the industry has been recovering of late. Manufacturing has also been robust, with strong vehicle sales and production also being driven in part by demand from people who need to buy new cars that were damaged by the hurricanes.
“Wage growth is picking up,” Zandi added. “Looking at the plethora of wage statistics, including from ADP, going back three or four years wage growth was 1.5 to 2 percent per annum. It’s now at 2.5 to 3 percent per annum, and I wouldn’t be surprised if we weren’t north of 3 next year.”
The tax reform bill could have a significant impact on the job market next year. “If the legislation signed by the president is similar to the legislation passed by the Senate, it will add to the GDP and the deficit,” Zandi noted. “The prospects for the labor market overheating are a growing risk as we move to next year. Short-term interest rates will rise because of the stronger growing economy and the risk of overheating.”
He anticipates further interest rate hikes from the Federal Reserve in 2018. But the job market statistics are largely a positive. “Let’s enjoy it,” said Zandi. “It would take an awful lot to derail it.”