• US ADP employment adds 214K jobs in February
• Nonfarm payrolls on Friday to show some improvement compared to January
• Slower economic activity and weaker profits in the US will likely result in more moderate employment growth, but no recession
Global-Daily-Insight-3-March.pdf (68 KB)
ADP employment adds 214K jobs in February
The ADP employment report for February showed that private payroll growth increased 214K on the month, above consensus estimates (190K) and slightly higher than the revised January figure of 193K. Construction continues to show some improvement, with 27K additional jobs added, while manufacturing firms shed 9K jobs. The decline in manufacturing is a disappointment since in January’s employment report, the manufacturing sector saw some hiring. The service providing sector continues to show strong hiring despite the weak nonmanufacturing surveys reported in the beginning of this year. The expansion in jobs was driven by professional business services. The ADP report is generally an appetizer for Friday’s nonfarm payrolls report.
Nonfarm payrolls on Friday to show some improvement compared to January
The ADP report suggests there could be a firming of nonfarm payroll growth on Friday. We look for an increase of 165K in the private nonfarm payrolls and unemployment remaining at 4.9%. This is an increase compared to the 158K reported in January, but it is below consensus.
Slower economic activity will likely result in more moderate employment growth
Indeed, we expect job gains to slow down a bit throughout the year compared to 2015. We expect firms to start economising on labour as the job market continues to tighten. The combination of subdued productivity gains and rising wage growth will likely squeeze profit margins. These are still at high levels though, suggesting that there is room for some compression without having a large impact on employment growth.
However, slower labour growth would not point to a recession
A slower job labour growth scenario does not point to a recession in the coming year. Indeed, almost all labour market indicators are far from levels that have been reported before recessions. In fact, in the past nonfarm payrolls at similar levels than today’s have enforced economic expansions.