Private-sector payrolls in America surged by 291K last month, according to new ADP data. That was the largest increase since 2015 and significantly better than expected. The December print was revised slightly lower but the smoother 3-month average payrolls gain still rose to 204K, the highest reading since April and well above what is needed to keep pace with U.S. population growth. However, as we have explained before this particular ADP data series does a better job of confirming recent trends in the labor market than predicting what will be seen in the more important monthly nonfarm payrolls report from the government (due out this Friday).
To this end, today’s data showed that the pace of hiring has once again quickly stabilized as trade tensions ease. Moreover, payrolls last month jumped by 54K in the goods-producing sector, the largest gain in a year and driven by small- and medium-sized manufacturers. Small business job creation in general also strengthened in January, as firms with 1-49 employees added 94K payrolls, the biggest increase since July 2018. In terms of annual growth, though, the pace of hiring at smaller firms continues to lag, in part due to the additional challenges these organizations face when trying to compete with larger corporations for talent. Fortunately more small businesses are adapting to this environment by leveraging the various efficiencies provided by professional employer organizations (PEOs) that can make offering attractive benefits more affordable.