ADP Report Finds the Spring Jobs Thaw Is On

NEW YORK (TheStreet) -- The spring thaw is on and employers may be taking risks again.

The report from payroll-processing firm ADP (ADP) -- the nation's private employers added 191,000 jobs in March -- is a strong sign the winter weakness in the economy was about the weather after all, and that job gains of as much as 250,000 a month may be happening by May or June, Moody's Analytics Chief Economist Mark Zandi said in announcing the report. Moody's compiles the monthly data for ADP. 

Taking a side in a debate that has split economists and politicians alike, Zandi said employment gains have been held down more by business' unwillingness to take risks due to weak demand than by skills mismatches or other "structural" changes in the work force that supposedly have accelerated since the financial crisis in 2008.


He added that aversion to risk is likely to change as the economy improves this spring.

"Something around 200,000 a month is consistent with job growth we were getting before the winter, and consistent with 3% growth in the economy,'' Zandi said, adding that March's weather was not all the way back to normal. "The key to better growth now is hiring. Layoffs are very, very low.''

The strength in March was broad-based, ADP found. Construction companies added 20,000 jobs. Manufacturers and financial services companies each added 5,000, and the biggest gains came in professional/business services (53,000) and trade/transportation and utilities (36,000).  

Businesses of all sizes added jobs, with small companies hiring 72,000 people, middle-market companies adding 52,000 and large corporations adding 67,000. 

Taking a cue from new Federal Reserve Chair Janet Yellen, Zandi's 15-minute press conference covered a range of indicators of the labor market instead of narrowly covering the number of jobs added. 

He pointed out the rate of new hiring has stayed very low even as the number of open positions has moved back up to four million, a level almost identical to June 2005 when the unemployment rate was 5% instead of the current 6.7%. But the number of new monthly hires is 15% slower, adjusted for the size of the economy, according to federal data.

"We're at a point where businesses are going to start taking more risk,'' Zandi said. He also predicted the economy will reach full employment, with a 5.5% jobless rate, by late 2016 or early 2017 at the latest, he said.

The conviction is bolstered by newly announced improvements in manufacturing data, and especially reports that auto sales have rebounded to an annual pace of more than 16.3 million units, he said. The next step is to see a spring rebound in housing, which he said would drive improvement in small-business hiring. 

Job growth, as measured by ADP, fell by half between November and January. The March report shows that the monthly gains are still about 50,000 short of where they were when the economy began to cook in the fall.

If ADP is right, the March report is a crocus, and the larger blooms will be in plain sight by May. 

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

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