Private sector employers added 235,000 jobs in October, according to payroll giant ADP, despite lingering problems from the recent hurricanes and wildfires still affecting parts of the U.S.
Small businesses added 79,000 jobs last month, included 43,000 in businesses with between one and 19 employees, and 36,000 in businesses with between 20 and 49 employees.
Midsized businesses with between 50 and 499 employees gained 66,000 jobs in October.
Large businesses added 90,000 jobs in October, including 20,000 in companies with between 500 and 999 employees, and 70,000 in companies with 1,000 employees or more.
The service sector added 150,000 jobs in October, including 109,000 in professional and business services such as accounting and tax preparation along with other services. The financial activities sector added 9,000 jobs last month. The goods-producing sector added 85,000 jobs in October. Franchise jobs increased 30,600.
“The job market remains healthy and hiring bounced back with one of the best performances we've seen all year,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, in a statement. “Although the service-providing sector was hard hit last month due to the weather, we saw significant growth in professional services, especially in the higher paid professional technical jobs. Additionally, small businesses rebounded well from the impact of Hurricanes Harvey and Irma, posting very strong gains.”
Mark Zandi, chief economist of Moody's Analytics, which compiles the monthly national employment report with ADP, noted that the 235,000 jobs added in October represented an improvement from September’s 135,000 jobs, when the numbers took a big hit from the hurricanes. However, he explained during a conference call with reporters Wednesday that ADP’s difference was less dramatic than the one shown in the government’s official job numbers from the U.S. Bureau of Labor Statistics because of the ways that ADP and the BLS calculate the monthly payrolls. ADP measures the number of people on company payrolls while the BLS measures the number of people on company payrolls who actually get paid. He predicts that the number of job gains the BLS will release on Friday will be around 300,000. The BLS figures include jobs in both the private and public sectors.
“I do think the BLS number on Friday will probably be closer to 300K, stronger than the 235K we reported for ADP,” said Zandi. “The job market is still very healthy.”
He predicted the unemployment rate will decline to below 4 percent next year, the lowest rate since the dot-com boom.
“If you look at the number of open positions, it’s at a record high,” said Zandi. “It will just continue to get higher as we move forward. Job growth is not going to slow, just supply. Consistent with all of this, wage growth is picking up, but it’s still low.”
With inflation added in, wage growth is between 2.5 and 3 percent on a year over year basis, but that’s up compared to a few years ago, when it was approximately 1.5 percent. “We’ve seen an acceleration,” said Zandi. “It should be well over 3 percent by mid next year.”
As House Republicans prepare to release their hotly anticipated tax reform bill this week, the White House’s Council of Economic Advisers recently produced a report predicting their tax plan would boost household wages and salary income by an average of $4,000. But Zandi is skeptical about the report’s forecasts as it was based on the broad tax framework released in September by the Trump administration and the so-called “Big Six” Republican leaders in Congress. The report didn’t take into account factors such as which tax deductions would be eliminated in the actual legislation, which has been pushed back for release from Wednesday until Thursday (see House Republicans delay release of tax bill amid late disputes).
“It was a partial analysis and didn’t ask how you are going to pay for it,” said Zandi, in answer to a question from Accounting Today. “If you pay for it with spending cuts or other tax increases, that wasn’t in the analysis. With deficit financing, if you’re borrowing money to pay for the tax cuts, that would raise interest rates. It was a good analysis as far as the plan goes, but it was halfway. What happens if you lower tax rates? That’s pretty good, but how do you pay for it? In my view, it was what it was.”
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