Private sector employment in the US greatly exceeded expectations in January according to the latest ADP employment report. 291,000 jobs were added vs. just 156,000 expected for the first month of 2020.
- Medium businesses accounted for most of the growth in nonfarm payrolls, followed by small businesses.
- The bulk of the growth was in services which saw increases in all categories.
- Mild January weather contributed to the growth in services.
Medium businesses of 50-499 employees added 128,000 jobs in January 2020. Small businesses hit an 18-month high in growth, adding 94,000 jobs, and large businesses added 69,000 jobs. The goods-producing sector added 54,000 net jobs, losing 2,000 in natural resources and mining but adding 47,000 to construction and 10,000 in manufacturing. The growth may indicate renewed health in the housing market.
Services added 237,000 jobs, led by 96,000 in leisure and hospitality. It’s likely that unseasonably mild January weather caused some leisure and hospitality businesses to take on additional staff to accommodate for increased demand. Education and health services added 70,000, while trade, transportation and utilities added 8,000. Professional business services added 49,000. Franchise employers added 45,100 new jobs.
The healthy growth shows that the labor market remains robust despite the hiring slowdown seen throughout 2019. While the market has tightened, this is partially due to a shortage of skilled workers. Layoffs and unemployment remain low, and the labor market is in a position to fuel the consumer spending that accounts for two-thirds of US economic activity. The Federal Reserve believes that the economy will continue its record-breaking period of expansion, recently electing to put interest rates on hold for the foreseeable future.
— Jill Mislinski (@JillMislinski) February 5, 2020
Mark Zandi, chief economist of Moody's Analytics, said, "Mild winter weather provided a significant boost to the January employment gain. The leisure and hospitality and construction industries in particular experienced an outsized increase in jobs. Abstracting from the vagaries of the data underlying job growth is close to 125,000 per month, which is consistent with low and stable unemployment."
ADP Research Institute VP Ahu Yildirmaz said "The labor market experienced expanded payrolls in January. Goods producers added jobs, particularly in construction and manufacturing, while service providers experienced a large gain, led by leisure and hospitality. Job creation was strong among midsized companies, though small companies enjoyed the strongest performance in the last 18 months."
Gold prices have held gains following the unexpectedly strong job growth. Spot gold last traded at $1,554.68/oz, up 0.28% with a high of $1,562.13/oz and a low of $1,548.42/oz. Gold had been rallying in the face of a correction following strong stock market activity, and it’s likely that the job growth offset further upward momentum in precious metals.