ADP Says February Hiring Was Strongest In Years

If today’s employment report from payroll processor ADP is any indication, February was a good month for hiring. A very good month.

The 217,000 private sector jobs that ADP says were added during the shortest month of the year was the largest increase reported by the company since November 2006.

Based on ADP’s payroll data and compiled by Macroeconomic Advisers, the monthly Employment Report is considered a harbinger of the official Labor Department report that will be released Friday. While the two reports use different methodology and the government report includes public sector employment, the ADP report offers economists an early look at the employment trend.

Economists had been expecting the ADP report to show an increase of 170,000 to 180,000. Estimates for the government report from the U.S. Bureau of Labor Statistics average 200,000 more jobs in February, according to a survey by Dow Jones Newswires.

The service sector accounted for 202,000 of the February growth. Small and mid-sized employers (up to 500 employees) added most of the jobs. Of the total, employers with more than 500 workers added only 13,000 to their payroll. Manufacturing added 20,000 jobs.

Overall, said ADP, “The recent pattern of rising employment gains since the middle of last year was reinforced by today’s report, as the average gain from December through February (217,000) is well above the average gain over the prior six months (63,000).”

Despite the strong ADP report, and an equally robust report Tuesday on manufacturing sector activity from the Institute for Supply Management, economists are still hesitant in their optimism. In his testimony before Congress yesterday, Federal Reserve Chairman Ben Bernanke said there are “grounds for optimism,” but added, “until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.”

As if to underscore that caution, global outplacement consultancy Challenger, Gray & Christmas reported that planned layoffs increased in February for the second month in a row. The 50,702 job cuts announced last month was up 32 percent from January’s 38,519, and was the highest since March.

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“It is too soon to say whether the increases in January and now February represent a trend. Certainly the specter of rising gas prices could impact employers’ staffing decisions over the next six months. At the very least, rising energy costs could force employers to postpone hiring plans. At worse, increased costs could kill the fragile recovery and spur another round of layoffs,” said CEO John A. Challenger.

Bernanke, too, warned that rising oil prices could impinge the recovery, though as conditions are now, any effect was likely to be temporary.

Though it’s too soon to say what impact the Mideast turmoil will have on hiring, The Conference Board reported today that online job postings were down slightly in February. The Board’s Help Wanted OnLine Data Series tracks online job postings in the U.S., reporting the total number of listings as well as new posts.

A second, similar index, compiled by Monster — the Monster Employment Index — is to be released tomorrow.

At ERE’s Expo later this month, panelists will discuss the outlook for recruiting jobs this year, and detail how to use data from the BLS, and other organizations and groups to project hiring needs and labor availability.

John Zappe is the editor of TLNT.com and a contributing editor of ERE.net. John was a newspaper reporter and editor until his geek gene lead him to launch his first website in 1994. He developed and managed online newspaper employment sites and sold advertising services to recruiters and employers. Before joining ERE Media in 2006, John was a senior consultant and analyst with Advanced Interactive Media and previously was Vice President of Digital Media for the Los Angeles Newspaper Group.

Besides writing for ERE, John consults with staffing firms and employment agencies, providing content and managing their social media programs. He also works with organizations and businesses to assist with audience development and marketing. In his spare time  he can be found hiking in the California mountains or competing in canine agility and obedience competitions.

You can contact him here.

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11 Comments on “ADP Says February Hiring Was Strongest In Years

  1. John, the entire report is here:

    http://www.adpemploymentreport.com/pdf/FINAL_Report_February_11.pdf

    Don’t know why you left out these critical bits of information:

    1. Numbers are seasonally adjusted
    2. The breakdown of the ADP numbers: Employment in the service-providing sector rose by 202,000 in February; employment in the goods-producing sector rose 15,000.

    Goods producing increases – aka manufacturing – are IMO more critical to recovery…

  2. @Steve According to the most recent BLS data, In January there were about 17 million private goods-producing jobs and 88 million private service jobs in the US. I’d argue that these numbers show that the service sector’s recovery is FAR more important then manufacturing to the overall economic recovery.

  3. David/Steve…How good of a leading indicator do you consider either the BLS or ADP numbers?

    Myself I’m most interested in knowing how the temp staffing industry will be doing in six to nine months out, and for that I’ve found the stock market cocktail indexes the most reliable predictor.

  4. @Dave Here’s the deal… GDP = Consumption + Business Investment + Government Spending + Net Exports; if we run a trade deficit, GDP – and recovery – is in very bad way. If net exports are negative, it means that we’re not producing enough goods (or the right goods) to turn the net in our favor. To produce more we need more people involved in goods producing jobs; the increase in service jobs says to me that we’re in a maintenance mode rather than a growth mode. Heck, the consumption numbers indicate that people aren’t buying at the levels required to hire more people to manufacture more goods!

    Good article from FT in 9/2010:
    http://www.ftpress.com/articles/printerfriendly.aspx?p=1622406

  5. @Gregg Employment numbers are considered lagging indicators, not leading. Companies wait until they see their business picking up, and only then do they start hiring more employees to manage the extra workload.

    The only component of the employment numbers that is a leading indicator is actually what you are trying to predict – temporary help. This is because employers tend to not want to commit to hiring full time employees early in a recovery, and they hire temps to fill in.

    You are in luck though. Temporary staffing had a strong year in 2010, and according to Adecco, this January their business was up 17% over last year. Not bad.

  6. @Gregg Given the birth/death BLS model, I don’t consider it to be a reasonable indicator of anything; ADP numbers are payroll based but that makes them lagging indicators especially when seasonally adjusted.

    I look at commodities because the folks who trade these are really crazy and are trying to MAKE the future.

    I also track how my nose itches but I’m less confident in this as a measure…

  7. @Steve I see where you are coming from, but I believe that you are misinterpreting Net Exports to mean “stuff that we ship overseas”. This is incorrect — Net Exports also includes services that we deliver overseas.

    If you are arguing that the US needs to correct it’s trade balance, then I agree completely. But since services are a part of Net Exports, it does not make sense to use this as an argument for why manufacturing jobs are more important then service jobs.

  8. Hi Folks,

    FOREIGNERS make stuff that people use because they do it cheaper than we can.

    AMERICANS make numbers go back and forth (like the $11T that went out of our economy) because our best and brightest are SO SMART.

    The Chinese will bail us out and make sure everything’s OK
    (at least for the richest folks who are the only ones that really matter) until they decide they can’t anymore. Then just in the nick of time, the mighty Invisible Hand (may Its name be forever blessed) will save us all!

    Cheers,

    Keith

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