ADP reported a much higher than expected private payroll gain of 298k for the month of February. Gains were broadbased with hiring in both the services sector and goods producing sector. Here is what ADP had to say about the February report:
From ADP: “February proved to be an incredibly strong month for employment with increases we have not seen in years,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Gains were driven by a surge in the goods sector, while we also saw the information industry experience a notable increase.” Mark Zandi, chief economist of Moody’s Analytics said, “February was a very good month for workers. Powering job growth were the construction, mining and manufacturing industries. Unseasonably mild winter weather undoubtedly played a role. But near record high job openings and record low layoffs underpin the entire job market.”
Unlike GDP, which was revised down to 1.2% for Q1 by the Atlanta Fed, the employment indicators are providing a more favorable view of the economy. It is our belief that employment tends to be a lagging indicator for the health of the economy. Most businesses do not lay off employees in anticipation of a recession, but only take the difficult steps of reducing staff only after a recession has already impacted demand.
However, for now, the increase in optimism since the election does appear to be manifesting itself in businesses becoming more comfortable to hire. It remains to be seen if hiring can be sustained at this level if optimism fades. This is why we believe Trump’s agenda will be very important to follow. If recent optimism is due to expectations for tax reform, infrastructure spending, and regulatory relief, then, these items must come to pass in order for this optimism to continue to be warranted.
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