The U.S. Labor Market Started 2018 With a Bang

January national employment

The latest ADP National Employment Report reveals an unexpectedly prosperous January, and a strong start to 2018 for the US employment market.

The U.S. labor market began 2018 with a strong January showing, according the latest ADP National Employment Report (NER). Job growth exceeded expectations, adding 234,000 non-farm, private sector jobs. January lines up with January of last year in several key ways, showing that the U.S. labor market continues to be strong.

With new federal tax legislation still taking full effect, however, it will take several more months to determine what if any impact it will have on the labor market.

A New Year, a New Leaf for American Business

The NER indicates that large U.S. businesses hired an impressive 85,000 new workers in January, helping to strengthen the year's opening month despite drops in small and midsized business hiring relative to December. The rebound experienced by large businesses last month generally mirrored the rebound these same companies experienced last January, after a similarly lackluster end to 2016.

Small businesses added just 58,000 new jobs, down from 93,000 in December. Though midsized businesses accounted for the largest single addition of 91,000 new jobs, they also saw a slight dip from December's figure of 99,000. It's notable that relative to the averages, these numbers are still solid — just less impressive when coming directly after such a stellar December.

The strength of midsized and large organizations over the past few months may be the result of a quickening in the global economy, which Industry Week reports is likely due to improved global trade and an invigorated market for Middle Eastern crude oil.

Service Industries Are Still the Lifeblood of U.S. Jobs Market

The big story of January's labor market is found in the industry breakdown, however. Goods-producing industries had a tough month, adding just 22,000 jobs. This hiring was spread fairly evenly between construction adding 9,000 and manufacturing adding 12,000, followed by natural resources and mining adding only 1,000.

The biggest gains all came from the service industries, which collectively contributed 212,000 of the 234,000 jobs gained last month. Leisure and hospitality saw an unusually high proportion of this, adding 46,000 jobs compared to just 27,000 in December and a monthly average of 34,000 in 2017. Trade, transportation and utilities also saw solid growth, adding 51,000 jobs and continuing a series of strong months.

The NER shows that professional and business services also had a solid month, with 46,000 new jobs. But after such a strong 2017, it is still lagging behind last year's monthly average of 58,000. The only real loser in January's service industries was the information services industry, which lost some 3,000 jobs.

January's success is due in part to the success of the service industry as a whole. The financial services, education, and health care industries all showed continued strong growth after fine performances throughout 2017, proving that service sector employers are still the most reliable lifeblood of the U.S. jobs market.

The U.S. Labor Market Looks Strong

January's numbers indicate that the U.S. labor market still has a reliable foundation and the capacity for another banner year in 2018. Additionally, the unemployment rate sits at 4.1 percent, according to the Bureau of Labor Statistics, maintaining a low first set in October 2017. January's ADP National Employment Report shows a strong start for the labor market in 2018.

Mark Zandi, chief economist of Moody's analytics, sums up the outlook for 2018 as follows: "The job market juggernaut marches on. Given the strong January job gain, 2018 is on track to be the eighth consecutive year in which the economy creates over 2 million jobs. If it falls short, it is likely because businesses can't find workers to fill all the open job positions."