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Economic Watch: Private Jobs Grow in January, Non-Manufacturing Activity Up

February 5, 2014

By Evan Lockridge

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Private sector employment increased by 175,000 jobs from December to January, according to new report released Wednesday from the payroll service provider ADP.

Goods-producing employment rose by 16,000 jobs in January, a decrease from a downwardly-revised figure of 50,000 in December. Nearly all of the growth came from the construction industry, which added 25,000 jobs over the month, following increases of 30,000 and 32,000 in the prior two months. Manufacturing lost jobs in January. The decline of 12,000 followed a revised gain of 16,000 in the prior month and was the first drop in industry payrolls since July 2013.

Service-providing industries added 160,000 jobs in January, down from an upwardly-revised December figure of 177,000. The report indicates that professional/ business services contributed the most to growth in service-providing industries, adding 49,000 jobs. This was well below the average gain of the prior two months of 65,000.

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Mark Zandi, chief economist of Moody’s Analytics, said, "Cold and stormy winter weather continued to weigh on the job numbers. Underlying job growth, abstracting from the weather, remains sturdy. Gains are broad based across industries and company sizes, the biggest exception being manufacturing, which shed jobs, but that is not expected to continue.”

Payroll growth for businesses with 49 or fewer employees slowed in January, adding 75,000 jobs. This is the slowest pace of small business job growth since August 2013. Employment levels among medium-sized companies with 50-499 employees rose by 66,000 and employment at large companies – those with 500 or more employees – increased by 34,000. While this represented acceleration in job growth for mid-size firms, growth at large firms was nearly half of what it was in December.

A separate report on economic activity in the non-manufacturing sector, also released Wednesday, shows it grew in January for the 48th consecutive month, according to the nation’s purchasing and supplies executives.

The Institute for Supply Management says its index registered 54% in January, 1 percentage point higher than the seasonally adjusted reading of 53% in December.

A reading above 50% shows expansion.

Eleven non-manufacturing industries reported growth in January. The majority of respondents' comments reflect an improvement in business conditions, according to ISM, with some indicating that weather conditions have impacted their business.

“Service production remains positive, maintaining the trend pace of activity as we head into 2014. But momentum is the name of the game, something that seems to be lacking in nearly all aspects of the economy, particularly when it comes to consumer spending,” said Lindsey Piegza, chief economist at the investment firm Sterne Agee. “Recall, despite quarter to quarter volatility, consumers continue to spend at a stagnant 2% pace. More of the same, while positive, translates into modest GDP growth or simply the same 2% to 2.5% range of the last several years.”

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