December Jobs Increase Highest Monthly Increase Since 2001

Written by: Alison Pruitt

The Report:  Payroll-processing company ADP today released a monthly employment report showing that businesses added 325,000 jobs in December – more than predicted.  The results are the highest monthly jobs increase going back in records to 2001.  ADP bases its report on the payrolls of 337,000 businesses that employ a collective 21 million workers. Their data does not include governmental employers.

The bulk of the jobs were created by small and medium-sized businesses with fewer than 500 employees. The service sector of the economy produced 273,000 jobs while the production side added only 52,000. The Bureau of Labor Statistics (BLS) also showed that first time unemployment benefit claims declined last week by 15,000 to 372,000; the previous four weeks show the lowest first-time claim rate in three years.  Employer-announced job cuts in December declined 1.6% over November to 41,785; however, for all of 2011 such layoffs were up 14% compared to 2010.

The Projections: With employment rate increases of 206,000 in November and 130,000 in October, analysts were not expecting a big surge in December employment. Based on previous months’ figures, analysts contacted by Bloomberg predicted an increase of 125,000 to 230,000 for December.  The consensus figure for the 38 economists surveyed was 160,000, so the actual amount was double the average prediction.

Some experts warn that ADP’s December employment figures may be skewed by the “purge effect” because many employers keep employees on the payroll through the end of the year. So some employees who have been laid off or have quit are not reflected in these figures, making it difficult to come up with accurate employment numbers for that month. However, it is impossible to say to what degree purging would affect these numbers.

What This Means for Consumers:  Analysts agreed that the better-than-expected figures are an indication of strengthening in the economy.  Paired with the decrease in new unemployment claims, the news suggests an improvement in a weak labor market, good news for unemployed Americans.  Bloomberg quoted Sean Incremona, a senior economist at 4cast Inc., “We certainly are seeing resilience in the job market. We’ve seen some improvement versus earlier in 2011 and it’s encouraging.”

Experts are also hoping such strengthening in the job market will spark a rise in consumer spending, which accounts for 70% of the U.S. economy.  After the report was released, stocks saw an uptick, trimming their losses from earlier in the day – demonstrating that the market saw the report as a hopeful sign for economic improvement in 2012.


December Jobs Increase Highest Monthly Increase...

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