ADP finds private sector added 237,000 jobs in August

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Private sector employers added a robust 237,000 jobs in August, according to payroll giant ADP, with strong gains in professional and business services.

Small businesses added 48,000 jobs this past month, including 18,000 in businesses with between one and 19 employees, and 30,000 in businesses with between 20 and 49 employees. Midsized businesses with between 50 and 499 employees gained 74,000 jobs in August. Large businesses added 115,000 jobs, including 22,000 in companies with between 500 and 999 employees, and 93,000 in companies with 1,000 employees or more.

Service-providing businesses added 204,000 jobs in August, including 39,000 in professional and business services, such as accounting and tax preparation. The financial activities sector gained 11,000 jobs. Franchise jobs increased by 21,200.

Goods-producing businesses added 33,000 jobs in August, including approximately 18,000 in construction and roughly 16,000 in manufacturing, although the natural resources and mining sector lost 1,000 jobs.

“In August, the goods-producing sector saw the best performance in months with solid increases in both construction and manufacturing,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, in a statement. “Additionally, the trade industry pulled ahead to lead job gains across all industries, adding the most jobs it has seen since the end of 2016. This could be an industry to watch as consumer spending and wage growth improves.”

Mark Zandi, chief economist of Moody's Analytics, which compiles the monthly national employment report with ADP, predicted during a conference call with reporters Wednesday that the official jobs report that will be coming out Friday from the U.S. Bureau of Labor Statistics will likely show numbers far below ADP’s numbers by as much as 50,000 to 100,000 jobs, at least initially, but will then be revised upward. The August job numbers are often low when first reported because many large corporations make up the numbers and the staffers who report them to the BLS are frequently on vacation this time of year, so the numbers traditionally dribble in slowly for the August jobs report. The number of jobs added could come in as low as 137,000 when the BLS initially reports the numbers, even though it includes both the private and public sectors, but will be subsequently revised upward in future reports.

Zandi does not believe Hurricane Harvey will make much of an impact on the job numbers nationally. The devastating storm will likely spur around 10,000 or 20,000 construction jobs in Texas, although businesses and homeowners have already had trouble finding enough workers for the construction industry in that state.

“The labor market is already tight in many parts of the country,” he noted. “In fact, one sidebar is that the reconstruction after Harvey is going to require a lot of construction workers in a part of the country where jobs in the construction trades are very, very tight. There was already a real shortage of construction workers. But we are going to see job growth slow just because businesses won’t be able to fill those open positions, which are now at a record high. At some point—I’m not precisely sure when—we’re going to see job growth slow from 200K closer to that 100K figure, so that’s something we should prepare ourselves for.”

President Trump is scheduled to pitch his tax reform plans during a speech in Missouri today, and if Congress manages to pass tax reform legislation, that could provide a boost to the economy. However, the Trump administration's tax plan is still vague, and the prospects for passage uncertain. Congressional Republicans have not introduced a detailed plan yet either.

Zandi noted that Congress will be consumed next month when it returns from its August recess with passing a budget resolution to keep the government running and increasing the Treasury debt limit. He predicted that any budget resolution passed next month will be short term and Congress is likely to just kick the can down the road until the end of the year. Congress will likely also need to deal with aid for victims of Hurricane Harvey as the Federal Emergency Management Agency's disaster funds are in danger of running out.

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