Increasing private payrolls in the United States


Increasing private payrolls in the United States

The payrolls in the United States increased more than expected in December, indicating the strength of the underlying labor market. Still, the rise in the number of COVID-19 infections may slow the momentum in the coming months.

The increase in private hiring in the ADP's national employment report on Wednesday was based on data collected in mid-December, just as the Omicron variable was sweeping across the country, causing some events to be canceled and hundreds of flights.

The labor market continues to recover," said Jos Foucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. "However, the Omicron variant presents a significant downside risk to the near-term labor market recovery."

Private payrolls jumped 807,000 jobs last month, the most in seven months, after rising by 505,000 jobs in November. Economists polled by Reuters had expected private payrolls to increase by 400,000 jobs.

The ADP report was developed jointly with Moody's Analytics and released ahead of the Labor Department's most comprehensive and closely watched employment report for December on Friday. However, due to methodological differences, it has a poor track record of predicting the number of private jobs in the department's Bureau of Labor Statistics employment report.

Economists expect some disruption from the winter wave of infections, albeit not at last summer's level. The blow to the labor market is expected to be seen in January data.

The United States reported nearly one million new coronavirus infections on Monday, the highest daily tally of any country in the world.

Airlines canceled flights, and some school districts halted in-person learning when sick workers called up.

"Most of these absentees will continue to be paid and therefore are considered employees this month," said Michael Pierce, chief US economist at Capital Economics in New York. "But a significant minority who do not get paid sick leave will not, which could erode hundreds of thousands of official nonfarm payrolls in January."

However, the demand for labor is strong amidst the severe shortage of workers. Last month, the surge in private hiring was driven by a 246,000 increase in the leisure and hospitality industry. Professional and business services added 130,000 jobs.

The industry hired 74,000 additional workers and increased construction payrolls by 62,000 jobs. A strong housing market supports employment on construction sites, although higher mortgage rates could slow demand.

A report from the Mortgage Bankers Association showed on Wednesday that applications for loans to buy a home have declined over the past two weeks. Although the data can be choppy during the holidays, it is in line with other indications that the housing market could lose steam. Contracts to buy a previously owned home fell in November.

Despite the ADP's choppy track record in forecasting the private jobs component of the Labor Department's monthly employment statement, last month's jump was another sign that job growth may accelerate in December.

The government also conducted a survey of businesses and households for its employment report last month in mid-December.

Economists at Goldman Sachs raised their jobs estimate for December by 50,000 to 500,000 after the release of the ADP.

"But the ADP report broadly supports our view that the labor market continues to tighten despite the recent outbreak of COVID and some signs of weak consumer activity recently," said Daniel Silver, an economist at JPMorgan in New York.

First-time applications for unemployment benefits fell significantly between mid-November and mid-December. The Institute for Supply Management's measure of factory employment rose to an eight-month high in December, as manufacturers signaled an improvement in the labor supply.

According to a Reuters survey of economists, private jobs likely increased by 365,000 jobs in December. Total payrolls are expected to increase by 400,000 jobs. The economy created 210,000 jobs in November.

But the shortage of workers is hampering the recovery of the labor market. On Tuesday, the government reported 10.6 million jobs at the end of November.

In November, there were signs that unemployed Americans were slowly beginning to return to the workforce, but the rising number of coronavirus infections may force some to stay home.

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