First cut, maybe not. The ADP employment report came out this morning at a weak 132,000 new jobs, well below the recent official numbers. This is the weakest ADP number since January 2021, with gains only in leisure/hospitality and trade/warehousing. Manufacturing was flat, and other categories showed declines. If this is a good indicator for the official numbers, then it will reflect a significant slowdown.
But chances are that it’s not a good indicator. The ADP numbers have been significantly weaker than the official numbers for most of the past two years and tend to lag when employment ticks up in the official numbers (which it did last month). More, this is a new and revamped version of the data series, which doesn’t have much of a history—likely making it even less reliable. Overall, as an indicator of the actual number, it is not very reliable.
Even if we can’t look to the ADP report for the number of new jobs itself, it might be a reasonable indicator of the trend, which would suggest official job growth will be down this month. That would be reasonable, given the very strong results from last month. But given that strong report, a decline would not be a problem. If we get a similar decline in the official numbers, we should see job growth of around 300,000-400,000 for last month. That result is down from the prior month, but it is still very strong.
In particular, it is above two key levels: that needed to absorb new workers coming into the labor force and above the stabilized levels we saw before the pandemic. Those levels are in the 200,000-250,000 range. As long as job growth stays above that, the labor market remains tight.
Other data also suggests the labor market is still tight. The number of available but unfilled jobs ticked up by 500,000 last month, showing that demand for labor remains strong—and that companies are still having problems hiring enough people. That is not an indicator of a much weaker labor market. The preliminary revisions to prior jobs reports are also looking to be considerably stronger than initially reported, suggesting more momentum. From all indicators except the ADP report, the job market still looks to be moving ahead.
So, look for between 300,000 and 400,000 new jobs in the report on Friday. This is a good number. It’s not super strong, like last month, but it is strong enough to keep the economy growing and to absorb the large number of vacant job openings. If the number comes in that range? The economic growth light will remain green.