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US Job Market Isn’t Showing Any Signs of Slowing Down

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About the ADP National Employment Report

ADP, a human capital management solution provider, releases a monthly report on US non-farm employment. This report discusses the changes in employment based on sector and the size of the industry. ADP is a global firm and in the US alone, it processes the payroll data of approximately 24 million workers. This monthly report uses actual, anonymous payroll data of 411,000 clients that ADP services. This report is usually released two days before the non-farm payrolls data released by the Bureau of Labor Statistics (or BLS) but was released a day later this month because of the holidays.

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December payrolls bounce back after the November drop

As per the ADP National Employment Report, the US private sector employment rose by 250,000 jobs in December, a healthy improvement from the 190,000 jobs added in November. As per the comments by Ahu Yildirmaz, the vice president of ADP Research Institute, the labor market is showing no signs of a slowdown.

The positive takeaway from 2017 was the improvement of employment in the services and manufacturing (XLI) sectors, and the number of jobs added by small businesses (IWO). Stronger Christmas sales helped improve the number of jobs in retail (XRT) and delivery services (FDX) in December.

Market reaction to the ADP report

The US financial markets (SPY) consider the ADP report a preview of the BLS report and react to this report only if there is a strong surprise in the numbers. The December consensus expectation was for 191,000 jobs, so 250,000 is a very strong surprise. A tighter job market could lead to a faster rate hike pace from the Fed, which could lead to higher yields if inflation improves. The bond (BND) market yields jumped higher after the ADP report and Friday’s non-farm data.

In the next part of this series, we’ll discuss the ADP national employment report and understand which sectors reported the highest increase in jobs last month.

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