Employers in the private sector added 215,000 jobs from October to November, according to payroll giant ADP, in a sign of increasing strength across broad segments of the economy despite challenges like health care reform and the lingering effects from October’s government shutdown.
The company’s monthly ADP National Employment Report, produced in collaboration with Moody’s Analytics, found that small businesses with between one and 19 employees added 57,000 jobs, while those with between 20 and 49 employees added 45,000. Midsize businesses with between 50 and 499 employees added 48,000 jobs. Large businesses with over 1,000 employees added 70,000 jobs, but there were job losses of 5,000 among businesses with between 500 and 999 employees.
The goods-producing sector added 40,000 jobs, up from 29,000 in October, with the construction and manufacturing industries each contributing 18,000 jobs.
“The job gains were broad-based across all industries,” said Mark Zandi, chief economist with Moody’s Analytics. “There were very significant gains in construction and manufacturing, which is good news. Those are relatively high-paying jobs. There were good solid job gains across most of the company sizes. Big companies are continuing to do very well, but even the smaller companies are adding on a more consistent basis.”
The service sector added 176,000 jobs, an increase from 156,000 in October. Professional and business services employment rose by 38,000, while financial activities added 5,000 jobs. The combined trade, transportation and utilities sector added the most jobs with 45,000 over the month.
There were some upward revisions to ADP’s job reports in the last couple of months, Zandi pointed out, mainly related to recent revisions by the U.S. Bureau of Labor Statistics, which were also in the positive direction. The October job gains were revised upward to 184,000, from an initial figure of 130,000 (see ADP Sees Private Sector Adding 130,000 Jobs in October).
“The job market is holding up well, which is very encouraging,” he added. “I am surprised that we haven’t seen some weakening in the job market related to what happened in October in Washington with the shutdown of the government and the brinkmanship over the Treasury debt limit. I had expected to see some fallout over that in the jobs data, but I just don’t see it.”
However, there has been some fallout in terms of business investment, particularly in October.
“You can see the effects of the shutdown in consumer confidence and in retailing and auto sales,” said Zandi. “I do think the effect of the shutdown and the brinkmanship over the debt limit did damage economic growth, but despite that businesses did continue to look through that to hire at least at the same pace as prior to all of this. That’s very encouraging as we make our way into next year. If Washington doesn’t botch it early next year, keeps the government open and raises the debt limit in a timely way, I think the prospects are now improving that we will see much better growth in 2014 in terms of jobs, overall GDP and lower unemployment. I think everything is coming together for a much better economy as we move towards 2014.”
Zandi said he hasn’t seen any impact from health care reform on the job numbers, including among company with close to 50 full-time employees, a key threshold in the legislation. “The script is still being written,” he added. “The employer mandate was [delayed] for a year and businesses are not responding. They may respond next year, but it’s not evident in the data so far. That’s also the story in other labor market data, with no indication of any change in hours worked, part-time employment and average hourly earnings, even in those industries where health insurance coverage is low and you’d expect health care reform to have an impact. Broadly speaking, there’s no meaningful evidence of any impact there.”
He thinks that if the job gains continue over the next few months at a similar pace as October and November, with over 200,000 jobs added per month, the Federal Reserve may decide to begin tapering down its quantitative easing monetary policy.
“The job market data is now increasingly consistent with the idea that the Fed can begin the process, which will be a very long process, towards normalizing monetary policy,” said Zandi. The only potentially negative sign is that job growth has been stronger in recent months than growth in both gross domestic product and productivity.
Zandi was asked by Accounting Today about the contrast between the 5,000 jobs added in the financial activities sector and the 38,000 added in professional and business services. “Financial services have been soft,” he said. “We’ve had a string of outright monthly declines in financial services. The November number was a small positive. A lot of the weakness is related to mortgage banking. The end of the refinancing boom has caused big layoffs in some of the large banks that are engaged in the mortgage banking business. That’s weighed really heavily on the financial services jobs. That may be coming to an end. I think the big banks were pretty aggressive in reducing staff. I don’t expect a lot of job growth in financial services for a while, but perhaps the job losses will abate and are over. November’s gain may be a signal that those layoffs may be abating and coming to an end.”
In terms of professional and business services, which include accounting and tax preparation along with a host of other types of services, Zandi noted that the job gains in November were consistent with recent months. But it is difficult to draw any conclusions about a trend because the different types of activities in this sector are so varied.
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