It’s premature to declare today’s data as convincing evidence that the labor market’s growth rate is accelerating. Rather, the news is largely a sign of a return to a stable pace of moderate growth after a harsh winter. Nonetheless, the directional change is encouraging. As Mark Zandi, chief economist of Moody’s Analytics, notes in a press release with today’s update: “The job market is gaining strength. After a tough winter employers are expanding payrolls across nearly all industries and company sizes. The recent pickup in job growth at mid-sized companies may signal better business confidence. Job market prospects are steadily improving.”
In fact, the year-over-year percentage changes in both the ADP numbers and the Labor Department’s data have been telling us all along that the broad trend has remained steady at a healthy level. Indeed, as the chart above reminds, private payrolls have been rising at roughly a 2% rate in recent history, with minimal variation. If there was serious trouble brewing, we’d see substantial deterioration in the year-over-year data. So far, however, it’s steady as she goes. The recent slowdown in the monthly comparisons looked worrisome earlier this year, but the resilience in the annual change has been a strong signal for thinking that the short-term weakness was just noise in the context of business cycle analysis.
Keep in mind too that the macro trend updates on these pages have been routinely upbeat as well, including this month’s profile. As such, it’s not terribly surprising to see a faster rate of growth in employment after the soft reports of late. That’s also been the message in the recent slide in new filings for initial jobless claims, which also point to better days ahead for the labor market.
How much confidence is appropriate for thinking that job creation will remain relatively steady if not pick up in the near term? The next clue arrives with tomorrow’s weekly update on new unemployment filings, followed by Friday’s official jobs report for April from the government. Meantime, today’s ADP release suggests that it’s getting harder to be a pessimist, again, on the near-term outlook for the US economy.