ADP Data Point to Stormy Weather's Hit on Hiring

NEW YORK (TheStreet) -- Looks like we  have to get through at least one last blast of a disappointing chill before things warm up in this economy.

According to Wednesday's report on private-sector hiring by payroll processor ADP, only 139,000 jobs were added last month. With government expected to shed more workers, we may see a below-forecast reading of 130,000 new jobs when the Labor Department issues its monthly jobs report Friday, said Moodys Analytics chief economist Mark Zandi, who runs the survey on which the ADP report is based.

The ADP report appears to have little effect on stocks so far Wednesday, but the short-term news gets worse from there. 

The ADP jobs survey, which relies on employers' payroll records, is less sensitive to the effect of weather  than the Labor Department's household survey, which relies on workers' own reports of whether they are working during the week including the 12th day of each month, Zandi said. Since the February survey week included bitter cold in much of the country, that could hold down the February numbers from Washington, Zandi said.

"The risks to the estimates are to the downside for February,'' said Zandi, guessing that Friday's report will disclose 130,000 new jobs, missing the consensus forecast of 150,000. His report said the financial-services industry actually shed workers last month, while industries including health care, leisure and hospitality that had been adding jobs rapidly slowed their pace.

The weather isn't the only short-term problem. Manufacturers are likely to pause after a wave of inventory accumulation in the third and fourth quarters that has brought stocks close to where they need to be in an expansion, he said. Consumer spending is likely to be hit at the margins by last year's cuts in food stamp funding, as well as the end of extended unemployment benefits to 1.3 million long-term unemployed.

"In the grand scheme of things, [the cuts] aren't massive, but they are substantial,'' Zandi said. "The combination of the two will shave a couple of tenths of a percent off [gross domestic product] growth" in early 2014.

That's the same hit -- 0.2 percentage points -- that rival consulting firm IHS Global Insight thinks the weather will impose on first-quarter GDP growth. Add up the temporary factors, and the economy's underlying 3% annual growth rate is being slowed to about 2% early this year, Zandi said.

But economists are sanguine the stall is only temporary.

At the Credit Union National Association, chief economist Bill Hampel said the fundamental backlog of demand for cars that propelled sales to an annual rate of more than 16 million in late 2013 (before dipping to a little more than 15 million early this year) isn't going anywhere. If anything, it's growing, because the slower sales of the last two months will probably show up in spring, he said.

"I wouldn't be at all surprised if annual rates hit 16 and a half [million] in the second quarter of this year,'' Hampel said.

The second-quarter bounceback will likely show up in jobs, too, Zandi said.

"We'll see 200,000 a month as we see snapback,'' he said. "April, May and June will look measurably better.''

In the meantime, Friday looks like the economic equivalent of this week's arctic blast in the northeastern U.S. The weather makes the short-term performance of the job market even harder to predict. Hampel said the weather made the data so unreliable he did not return some of the surveys he received in his  forecast of February jobs growth.

"Discretion was just the better part of valor,'' he said. "There's so much going on.''

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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