Business

January job growth smashes expectations; firms add 246,000 workers

A January report from ADP is confirming what economists have been projecting for months: American workers will see more jobs and higher wages in 2017.

Job postings are shown outside a new Wal-Mart Super Center as the company opens its first store in Compton, Calif. on Jan. 10, 2017.
Mike Blake/Reuters
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The economy over the last year has been on an upswing, with more people working, wages rising, and stock prices soaring. Now, robust January jobs numbers are confirming what economists have been projecting: The employment outlook for 2017 looks bright.

Private employers added 246,000 new workers last month, according to Wednesday's report from payroll software company ADP and Moody’s Analytics, an economic research firm. This is well above the 165,000 jobs that economists expected to see added in January, according to Reuters. It’s also well above the 153,000 jobs added in December, and the second highest jobs-growth month in the past year after June, when employers added 262,000 jobs.

“The US labor market is hitting on all cylinders and we saw small and midsized businesses perform exceptionally well,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, in an online statement. Every month ADP, now in partnership with Moody’s, releases anonymized US nonfarm private-sector payroll data that it collects from its 411,000 client companies.

Analysts found that in January medium-size businesses that have 50 to 499 employees added the most workers: 106,000. This was followed by 83,000 workers added by American corporations with 500 employees or more, and 62,000 jobs added by companies that employ up to 49 people.

By industry, the biggest growth – 201,000 jobs – was in the services sector, particularly in business services, which include administrative and technical support, and transportation. Goods producers – a group that includes manufacturing, construction, energy, and mining companies – had the best month in two years, says ADP, adding 46,000 jobs in January. Partly, the bump in jobs in this sector might be related to a warm January that could have led to an increase in construction last month, Dr. Yildirmaz told the Monitor in an e-mail.

Still, for manufacturing and energy – two industries that President Donald Trump’s administration is aiming to grow – 2017 will bring more progress, though nothing extraordinary, expects Michael Montgomery, an economist with business analytics firm IHS Markit.

“The manufacturing sector will do well but not great in 2017, and doing well beats the 2015 and 2016 lackluster performances by a wide margin,” Mr. Montgomery noted in an e-mail analysis Wednesday.

Moody’s chief economist, Mark Zandi, in a CNBC interview Wednesday dismissed the idea that the jobs growth is related to President Trump’s election and the massive corporate tax and regulatory tax cuts that he has promised. With these promises, the president has been trying to woo (and often pressure) manufacturers to bring overseas factory jobs home – or else.

“I don’t think it has anything to do with the election,” Dr. Zandi told CNBC. “If you look at growth across the world, it’s improved quite substantially.”

Election or not, the jobs growth bodes well for workers, who will see their wages continue to rise into 2017, by some estimates by 3 to 4 percent – barring any global trade wars, resulting from President Trump's proposed tariffs on imports from foreign companies, that could hurt US exporters and their workers.

Wages will rise because there are now more jobs available in the US economy than workers who can fill them, which will grow competition among employers, said Zandi.

“Wage growth is accelerating and it’s going to accelerate more; it’s going to be a workers’ market,” he told CNBC.

 The US Bureau of Labor Statistics will release the government's jobs data, based on a survey of US workers, on Friday.