There were two important reports on the U.S. economy released this morning. First, data from ADP showed that private-sector payrolls in America rose by 234K this month. That is down slightly from December but significantly better than expected. Under the hood, most of the private-sector payrolls added this month were as usual found in the services sector (+212K), but the goods-producing sector also posted a solid 22K gain thanks to strong manufacturing and construction hiring. As for small business job creation, payrolls at firms with 1-49 employees rose by 58K in January, the fourth monthly gain in a row and equal to a quarter of all the private-sector payrolls added to the economy in January. Mark Zandi, chief economist of Moody’s Analytics, added that “The job market juggernaut marches on. Given the strong January job gain, 2018 is on track to be the eighth consecutive year in which the economy creates over 2 million jobs. If it falls short, it is likely because businesses can’t find workers to fill all the open job positions.”
Elsewhere, a report from the Bureau of Labor Statistics (BLS) showed that total employment costs (employer-paid taxes such as Social Security and Medicare in addition to the costs of wages and benefits) in America grew at an elevated rate in the fourth quarter of 2017. Specifically, total compensation costs for civilian workers lifted by 0.6 percent in Q4, including a 0.5 percent gain in wages and salaries. Both of those figures are down slightly from Q3 but on a year-over-year basis total employment costs (excluding incentive pay) rose by 2.7 percent last quarter, the fastest pace of annual growth recorded during the current business cycle. Benefit costs (which make up 30 percent of total compensation) lifted by 2.3 percent in 2017, down from earlier readings and mainly due to softer medical care inflation. In fact, employer costs for health benefits rose by just 1.1 percent in 2017, the slowest pace of annual growth recorded since 1995.
Sources: Econoday, ADP, U.S. DoL, Twitter, Bloomberg, FRBSLPost author: Charles Couch