Job situation improves

There are two major sources of jobs data in the United States: the Bureau of Labor Statistics and Automatic Data Processing.  ADP is the country’s largest payroll processing firm so clearly it has its finger on the pulse of the U.S. jobs situation.  There are two things to pay attention to in both sets of data, the absolute level of jobs and the trend.  Because the data are often revised many times, the absolute level of jobs is often unreliable.  But a careful comparison of both sets of data provides insight into the underlying trend in job creation.

So this morning ADP reported that:

1.  The private sector added 93,000 jobs in November, the largest monthly gain in three years.  Economists had expected an increase of just 70,000.

2.  October’s job creation figure was revised upward to 82,000 from an initially reported 43,000.  Proof of the point I made above about revisions.

Analysis:  Clearly the trend here is that the private sector is creating jobs of significant magnitude – logging the best results since 2007.  Need I remind everyone that 2007 was in the heart of the BUBBLE?

While the absolute number of jobs created is exciting, look at the trend from October’s up 82,000 to November’s figure of 93,000 jobs created.  That is an acceleration in job creation.  Fantastic!  So not only are the absolute numbers showing buoyancy, the trend is accelerating.  This is highly encouraging.

Another thing of import is that the revision of October’s numbers is shockingly high.  Almost a 100% upward revision.  Because ADP primarily processes payrolls for larger U.S. companies for its estimates to be off means that the job creation is not coming from the large businesses that they serve.  Instead it is my speculation that the job creation is coming from smaller firms that fall outside of their exact data purview.  So the data are also likely an indication of a return to health of that most robust portion of the U.S. economy: small businesses.

Importance grade: 10; because of the magnitude of change in the absolute numbers of private sector job creation, as well as the acceleration of the trend, these data are highly significant.  Let’s hope that the job creation we are seeing is not just holiday season temporary hiring, and is, in fact, permanent job creation.  My own intuitive hunch is that about half of these jobs are of the long-term employment sort.

Jason