Rebounds in Energy and Construction Contribute to Unexpected 2017 Job Growth

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When it comes to job growth, the year 2017 is off to a surprising start. Private sector employment added 246,000 jobs in January, according to the ADP Research Institute® National Employment Report (NER). With sudden spikes of growth attributed to energy and construction rebound, surges in the goods-producing sector and gains at small- and midsized businesses, the job market is off to a healthy start in the new year.

Hiring Reaches Peak in Goods-Producing Industries

Even the goods-producing sector experienced strong growth. In fact, 46,000 jobs were added — the most in two years. "2017 got off to a strong start in the job market," says Mark Zandi, chief economist of Moody's Analytics. "Job growth is solid across most industries and company sizes. Even the energy sector is adding to payrolls again."

Construction Industry Shows Strong Gains

The construction industry added a healthy 25,000 positions in January. This was the largest monthly gain when looking at report data for the past twelve months (January 2016 – January 2017) with five of those months reporting losses. This significant gain could be a sign of continued positive growth in the months to come.

Is Energy Experiencing a Turnaround?

The 6,000 positions added in the natural resources and mining industry in January represent hope for an industry that's suffered more in recent months. So, could growth continue as a trend in the months to come?

The Exponent Telegram (The ET) reports operations are continuing despite being a low-priced environment. "This is largely because of efficiencies in new drilling and completion technologies, enabling operators to continue to deploy capital in the state while staying within cash flow," reports The ET.

Small and Midsized Businesses Defy Expectations

Small and midsized businesses added a combined 164,000 jobs in January 2017. Small businesses (1-49 employees) had suffered slightly in the second half of 2016, with rising wages and skill shortages making it difficult to compete with larger counterparts.

According to the ADP Research Institute® Small Business Report, recent vitality in the goods-producing sector is partly responsible. The goods-producing sector within small businesses added 12,000 positions, and the resurgence in construction and manufacturing could also be boosting small business payroll. HR leaders at small and midsized businesses should remain conscious of challenges in a tight job market.

More Positive Trends in Wage Growth

The ADP Workforce Vitality Index, which represents the total wages paid to the U.S. private sector workforce, has shown a positive trend in wage growth over the past few quarters. This may suggest that wages are beginning to reflect the tightening labor market. As employers struggle to find qualified workers, their focus shifts to retaining their experienced workers. This could lead to more generous raises than were given in previous years.

What's Next for the U.S. Job Market?

With unexpected growth in the goods-producing sector, 2017 could be full of surprises. Continued demand for goods-producing labor may contribute to more construction recovery and assist with increased hiring at small and midsized businesses, particularly for firms savvy enough to optimize their workforce planning strategies.

With a tightening labor market, it remains to be seen if we will experience similar trends in hiring or continued recovery in the energy industry. Highly skilled people should be hopeful about opportunities in the months to come as employers will need to focus their efforts on attracting and retaining talent with the expertise they need.