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The private sector added 202,000 jobs vs. just 150,000 expected in December according to ADP and Moody’s Analytics. Trade and construction led the growth in employment which was spread across many service industries. A further 160,000 positions are expected to be reported added to the labor market in Friday’s government nonfarm payrolls report.

Key Takeaways

• December saw 202,000 jobs added to the private sector vs. 150,000 expected.
• The number of positions added in November was revised significantly higher from 67,000 to 124,000.
• Mark Zandi, chief economist at Moody’s Analytics, described the job market growth as “moderate.”

Job growth last month vastly outperformed expectations with 202,000 new jobs added. The labor market also gained more jobs than initially estimated in November, painting a healthy picture of the market ahead of Friday’s nonfarm payrolls report which is expected to reveal 160,000 additional jobs. However, job growth has declined in manufacturing, energy production, and in small companies, threatening the low rate of unemployment.

Goods-producing industries saw 29,000 jobs added in December after losing 17,600 the month prior. Manufacturing declined 7,000 and natural resources and mining fell 1,000. In total, services added 173,000 jobs led by trade, transportation and utilities with 78,000. Professional and business services rose 61,000 and educational and health services rose 49,000. Financial activities rose 10,000. Construction added 37,000, the highest gain since April.

Very solid ADP report at +202K vs. +157K consensus, +67K prior (revised). Strong increase in construction, trade & transport and business services. Employment growth is also rebounding in small companies (1 to 49 employees) at 68K. Beware not always a good guide for the NFP. pic.twitter.com/kEExWTZ6nm

— Christopher Nicolas Dembik (@Dembik_Chris) January 8, 2020

Leisure and hospitality fell 21,000 positions, dealing a blow to what has been a major growth sector over the last ten years. Information services fell 14,000. Medium companies with 50 to 499 workers gained 88,000 jobs while small firms added 69,000 and large companies added 45,000.

Expert Outlook

Mark Zandi, chief economist at Moody’s Analytics, stated that the labor market is moderating, warning that the employment rate might be threatened by weakness in certain industries despite the overall growth.

“Manufacturers, energy producers and small companies have been shedding jobs. Unemployment is low, but will begin to rise if job growth slows much further.”

Ahu Yildirmaz, vice president and co-head of the ADP Research Institute said “the service providers posted the largest gain since April, driven mainly by professional and business services,” adding  "Job creation was strong across companies of all sizes, led predominantly by midsize companies.”

Market Reaction

Gold prices have ticked downward following the news of the unexpected strength in the labor market, although remain well above the $1,500 mark. Spot gold last traded at $1,572.06/oz, up 0.02% with a high of $1,611.10/oz and a low of $1,568.72/oz. Gold prices hit above a 7-year high following geopolitical turmoil surrounding the assassination of an Iranian general late last week, with many investors retreating to precious metals as a safe haven in a risk-averse climate.