ADP: Businesses added 234,000 private sector jobs in January, marking strong start to year

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Businesses added 234,000 jobs in January, payroll processor ADP said Wednesday, marking a robust start to the year for hiring and possibly signaling that the government on Friday will report a rebound in job growth after a weak number in the final month of 2017.

The hiring level was strong as economists expected ADP to tally 190,000 additional jobs at private U.S. businesses. It was the fourth-straight month of job gains above 200,000 in the private sector, a sign that the hiring trend remains strong.

The hiring in the first month of the new year bodes well for the remainder of 2018, says Mark Zandi, chief economist of Moody's Analytics.

"The job market juggernaut marches on," Zandi said in a statement in the ADP announcement. "Given the strong January job gain, 2018 is on track to be the eighth consecutive year in which the economy creates over 2 million jobs," he said. "If it falls short, it is likely because businesses can't find workers to fill all the open job positions."

The Labor Department on Friday is projected to announce 188,000 employment gains in the public and private sectors for January.

ADP tries to predict the Labor Department’s private-sector total, but it often differs from it substantially. For December, ADP counted 250,000 job gains by businesses while the government agency recorded 146,000.

More: Jobs market: Labor shortage means longer hours but more cash for workers

More: Jobs report: Employers added disappointing 148,000 jobs in Dec.

Average monthly payroll growth, according to Labor Department figures, has slowed from 226,000 in 2015 to 187,000 in 2016 and 171,000 last year. The downshift has been widely expected in light of a 4.1% unemployment rate that’s making it tougher for employers to find qualified workers.

Yet the monthly advances far exceed the 100,000 or so needed to keep pushing down the jobless rate. And the tight labor market is expected to fuel faster pay increases this year.

Paul Ashworth, chief U.S. economist at Capital Economics, says the strong ADP jobs report in January suggests that the government's weak job gains of just 148,000 in the final month of 2017 was "not the start of any serious downturn in labor market conditions."

Capital Economics is calling for the government to report on Friday that 200,000 non-farm jobs were created in January.

Overall, the stronger-than-expected ADP jobs count, Ashworth adds, "will keep the pressure on the Federal Reserve to continue hiking interest rates."

The Fed, which wraps up its two-day meeting policy Wednesday, is not expected to hike rates.

Investors, however, will be reading the Fed statement closely to see if it upgrades its economic forecast or hints at more than the three rate hikes it has already signaled for 2018.

The biggest job gains in January, according to ADP, came from mid-sized businesses, or those with 50-499 employees. Mid-sized businesses created 91,000 new jobs, followed by 85,000 hires from large businesses and 58,000 from employers with fewer than 49 workers.

The service sector of the U.S. economy added 212,000 jobs, with strength in trade, transportation and utilities, which added 51,000 jobs; education and health services added 47,000 jobs; professional business services, and leisure and hospitality both added 46,000 jobs, ADP said.

The goods-producing part of the economy added 22,000 jobs with the bulk of the gains coming from construction, which added 9,000 jobs, and manufacturing, which gained 12,000.

"We've kicked off the year with another month of unyielding job gains," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "Service providers were firing on all cylinders, posting their strongest gain in more than a year."