Private sector payrolls added 174K jobs in January

The private sector added 174,000 jobs in January, according to payroll giant ADP, despite the economic fallout and business closures from the COVID-19 pandemic.

The ADP National Employment Report, released Wednesday, showed gains across different business sizes and sectors. Small businesses gained 51,000 jobs, including 26,000 in businesses with between one and 19 employees, and 25,000 in businesses with between 20 and 49 employees. Medium-sized businesses with between 50 and 499 employees added 84,000 jobs. Large businesses increased by 39,000 jobs, including 28,000 in companies with between 500 and 999 employees, and 11,000 in organizations with 1,000 employees or more. The service sector accounted for 156,000 of the job increases, including 40,000 in professional and business services such as accounting and tax preparation, along with 1,000 in financial activities like banking. The goods-producing sector added 19,000 jobs, mostly from 18,000 jobs in the construction industry. Franchise jobs increased by 10,700.

The job gains arrived after Congress passed its latest stimulus package in December, including $284 billion in funding for a revived Paycheck Protection Program for small businesses, and the extension of the Employee Retention Tax Credit through the end of March. However, millions of businesses have closed over the past year due to the pandemic, leaving many of their former employees out of work. The slow rollout of vaccines and the emergence of dangerous new variants of the coronavirus are continuing to threaten an economic expansion as Congress and the Biden administration continue to negotiate over the size of the next relief package.

"The labor market continues its slow recovery amid COVID-19 headwinds," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, in a statement. “Although job losses were previously concentrated among small and midsized businesses, we are now seeing signs of the prolonged impact of the pandemic on large companies as well.”

Mark Zandi, chief economist at Moody’s Analytics, which compiles the monthly national employment report with ADP, doesn’t think the gains of 174,000 jobs in January will be enough coming on the heels of the loss of 123,000 jobs in December. “It does appear that the job market recovery from the pandemic recession that hit just about a year ago — hard to believe it’s been a year when the economy lost 22 million jobs in March and April of last year — but the recovery from that recession has largely stalled out,” he said during a conference call Wednesday with reporters. “Job growth has come to a virtual standstill.”

When the U.S. Bureau of Labor Statistics releases the official job numbers on Friday, Zandi predicted it may show a somewhat stronger gain in employment due to seasonal adjustment issues in industries that have been hit hard by the pandemic, such as retail, leisure and hospitality. However, he doubts the unemployment rate will remain at the current rate of 6.7 percent. “It hasn’t improved much at all since late last year, since October, and I don’t think we’ll see any improvement in the month of January,” he added. “In fact, we may see the unemployment rate notch up a tenth or two or three, just because job growth has slowed down so significantly.”