ADP: Businesses added booming 250,000 jobs in December

Paul Davidson | USA TODAY

Show Caption Hide Caption It’s now illegal to pay men more than women in Iceland Equal pay became mandatory on Jan. 1, 2018, in Iceland.

The final employment report of 2017, out Friday, could reveal a labor market that still has some pep in its step despite a dwindling pool of available workers.

Payroll processor ADP said Thursday the private sector added 250,000 jobs in December, possibly heralding a third straight month of strong gains in the government’s closely watched employment survey.

More: Will the economy bust out in 2018?

More: Hot housing market could cool in 2018

More: Minimum wage hikes: 18 states, 20 cities to lift pay floors Jan. 1

Economists estimated that ADP would announce 190,000 additional jobs at U.S. businesses. The Labor Department on Friday is also projected to tally 190,000 advances in the public and private sectors.

"The job market ended the year strongly,” said Mark Zandi, chief economist of Moody’s Analytics, which helps ADP compile the report. “Robust Christmas sales prompted retailers and delivery services to add to their payrolls.”

ADP tries to predict the Labor Department’s private-sector total and generally traces similar broad trends, although it often differs from it substantially.

ADP has been an especially unreliable forecaster in December, says Jim O’Sullivan, chief U.S. economist of High Frequency Economics. That's because at the end of the year, some employers remove workers no longer with the company from the payrolls reported to ADP, O'Sullivan says. Labor stops counting those workers as soon as they stop getting paychecks.

Still, O’Sullivan figures the government will announce 210,000 additional jobs last month, surpassing the monthly average of 174,000 through the first 11 months of 2017.

Despite steady demand from employers and brisk economic growth recently, average monthly job gains slowed from 187,000 in 2016 as the 4.1% unemployment rate meant fewer available workers. A further moderation to about 160,000 is expected in 2018, but average wage growth of 2.5% could pick up as businesses continue to struggle to attract and retain employees.

Yet some economists foresee 200,000-plus average gains this year as employers tap a surplus of potential workers not counted in the unemployment rate, such as discouraged Americans who have stopped looking for jobs.

In a note to clients on the ADP report, Chris Rupkey, chief financial economist of Mitsubishi UFJ Financial Group, said, “Employment wouldn't be growing this strongly unless companies were able to find workers among the unemployed or draw on those out of the labor force.”

The December payroll total is significant because it could provide the first untainted snapshot of the labor market in several months. The Labor Department recorded robust average job gains of 236,000 in October and November, but that partly reflected a rebound as workers in Texas and Florida returned to job sites after hurricanes curtailed employment in September.

In December, ADP said, small businesses added 74,000 jobs, midsize companies added 100,000 and large ones, 52,000.

Professional and business services led the gains with 72,000 new jobs. Education and health care added 50,000; trade, transportation and utilities, 45,000; and leisure and hospitality, 28,000. Construction added 16,000 jobs as rebuilding continued in hurricane-hit areas of Texas and Florida. Manufacturing added 9,000.