The U.S. economy added 237,000 private, non-farm jobs in August, according to the monthly employment report released this morning by payroll-management firm ADP and its partner Moody's Analytics. The seasonally adjusted result is a 17.91 percent increase from July's upwardly revised addition of 201,000 jobs, and a 68.08 percent increase over the previous August, when 141,000 jobs were created.
In a conference call with the press this morning, Mark Zandi, chief economist of Moody's Analytics, reported that job numbers are holding up particularly well because there are no significant headwinds to employment growth at the moment—since early 2016, the global economy has found its footing, and credit growth has been strong. However, Zandi expressed concern that this could change, especially if the government can't resolve a budget in a timely manner once Congress reconvenes in September.
“The job market continues to power forward. Job creation is strong across nearly all industries, [and] company sizes. Mounting labor shortages are set to get much worse," Zandi said in a press release. "The initial BLS employment estimate is often very weak in August due to measurement problems, and is subsequently revised higher. The ADP number is not impacted by those problems.”
Small businesses—those with one to 49 employees—added 48,000 jobs. Within that figure, firms that employ fewer than 20 people added 18,000 jobs, and firms that have 20 to 49 employees added 30,000 jobs. Mid-sized businesses—those with 50 to 499 employees— added 74,000 jobs in August, accounting for 31 percent of all new jobs. Mid-sized businesses have accounted for the largest share of employment gains by company size for the past four months, but large businesses with 500 to 1,000 plus employees made the biggest impact in August's report, accounting for 48.52 percent (115,000) of payroll additions. Within that figure, companies with 1,000 or more employees accounted for 80 percent of employment growth, adding 93,000 of the total 115,000 jobs added at large businesses in August.
By sector, 86 percent (204,000) of August's job gains can be attributed to the service-providing sector, which has anchored the ADP's job report for six consecutive months. The service-providing sector includes jobs in trade, transportation, and utilities; information; financial activities, professional and business services; education and health; leisure and hospitality; and other services. Six of the seven sub-sectors experienced growth in August, with only the Information sector reporting a decrease of 3,000 jobs.
The professional and business services sub-sector—which includes architecture and engineering firms—has been on an upward trajectory since March, adding 60,000 plus jobs the past two months. The sub-sector's pace of job growth ebbed slightly in August with the addition of 39,000 jobs, but still accounts for 19 percent of all new jobs added in the service-providing sector.
“In August, the goods-producing sector saw the best performance in months with solid increases in both construction and manufacturing,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute in the press release. “Additionally, the trade industry pulled ahead to lead job gains across all industries, adding the most jobs it has seen since the end of 2016. This could be an industry to watch as consumer spending and wage growth improves.”
The goods-producing sector, which includes jobs in natural resources and mining, construction, and manufacturing, added 33,000 jobs in August, a marked improvement from June, when the sector reported net-zero job growth after significant losses in construction and natural resources employment. The construction and manufacturing sub-sectors saw payroll additions of 18,000 and 16,000, respectively in August, up from an increase of 6,000 jobs, and a loss of 4,000 jobs, respectively in July. Employment in the natural resources and mining was the only sub-sector to see a drop in employment, reporting a decrease of 1,000 jobs.
Hurricane Harvey has already done significant economic damage to Houston and the surrounding area, and will present a need for additional jobs in construction, the utility industry, and state and local government. Harvey clearly will have a profound economic impact on the regions it has affected, but Zandi doesn't believe the storm will have a significant impact on national employment, and will only result in a addition of roughly 20,000 temporary jobs. More significantly, Houston and surrounding regions could take longer to begin recovery efforts due to longstanding labor shortages in the construction industry. A lack of qualified (and affordable) labor has plagued builders in many markets across the nation the past four years, but has been especially tight in major Texas markets. In contrast to rebuilding efforts after Katrina, Zandi believes it will likely take even longer for construction to pick up in Texas.
ADP's national employment report is often used as a precursor for the monthly Bureau of Labor Statistics jobs report, for which the August version will be released this Friday. Zandi expounded on the measurement issue he referenced in ADP's press release further in a conference call with the press, explaining that August BLS report numbers have been temperamental since the recession, often coming in weak and later being upwardly revised. The BLS survey is top-heavy and skewed to larger companies, while ADP's number is more representative of companies of varying sizes. Large companies have contribute most to job gains since the recovery began, so Zandi believes the most likely explanation is that the response rate of large companies to BLS' survey during August is delayed due to vacations and travel. Based on ADP's research of BLS reports the past few years, Zandi anticipates Friday's release could report a drop of 50,000-150,000 jobs, not because the job market is softer, but because of the measurement issue
For more information, read the full employment report from ADP.