Why should investors follow the ADP jobs report? (Part 4 of 8)
The ADP Employment Report
The recent ADP Employment Report came out on Wednesday, April 2. According to the report, ADP’s private sector employment estimate for March is 191,000. This is an increase from the upwardly revised 178,000 figure in February.
Key highlights of the March report
- The 191,000 private payroll employment figure for March included an additional 72,000 employees in the small business (with 1 to 49 employees) category, around 52,000 employees in the medium business (with 50 to 499 employees) category, and about 67,000 employees in the large business (with 500 or more employees) category.
- On a sectoral basis, the service-providing sector accounted for almost six times the jobs generated by the goods-producing sector.
- The professional and business services industry and the trade, transportation, and utilities industry continue to be the prime contributors to job growth.
Goods-producing employment rose by 28,000 jobs in March—slightly faster than an upwardly revised pace of 25,000 in February. Most of the gains came from the construction industry, which added 20,000 jobs over the month.
The SPDR S&P Homebuilders ETF (XHB), the PowerShares Dynamic Building & Construction Portfolio (PKB), and the iShares Dow Jones US Home Construction Index Fund (ITB), which includes companies like Home Depot, Inc. (HD) and PulteGroup Inc. (PHM) in its portfolio, are popular ETFs tracking the performance of the construction industry.
The report indicates that professional and business services contributed the most to growth in service-providing industries, adding 53,000 jobs—slightly more than the 49,000 we saw in February. Expansion in the trade, transportation, and utilities industry grew by 36,000—about equal to the 37,000 jobs added in February.
Important excerpt from the report
“The 191,000 U.S. private sector jobs added in March is slightly above the twelve-month average,” said Carlos Rodriguez, president and chief executive officer of ADP. “Hopefully, this could be a sign there is more growth to come.”
Comparing the March figure with the figures released over the last two months shows an estimated increase of private payroll employment by 121,000 and 178,000 for January and February, respectively.
Much of this growth can be attributed to the adverse weather conditions prevailing in the U.S. during those months. As Mark Zandi, chief economist of Moody’s Analytics, points out, “The job market is coming out from its deep winter slumber. Job gains are consistent with the pace prior to the brutal winter. The gains are broad-based across industries and business size classes. Even better numbers are likely in coming months as the weather warms.”
Browse this series on Market Realist:
- Part 1 - Must-know: Why should investors follow job indicators?
- Part 2 - Recommendation: ETF investors should follow key jobs reports
- Part 3 - The ADP jobs report: A must-know guide for ETF investors
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