US private sector smashes expectations as most jobs added since June
The US private sector jobs market smashed economists’ consensus expectations in January in a further sign the labour market in the world’s largest economy is heating up.
Employment in the US private sector rose by 246,000 jobs in the last month, according to payrolls company ADP, the fastest rate since June 2016.
This far outstripped the consensus prediction of a 165,000 increase. While the ADP numbers are usually more volatile than the government’s official figures, the rise suggests the vital non-farm payrolls on Friday could also perform better than expected.
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The increase represents a big jump in the pace of hiring compared to the previous month, when 153,000 jobs were added in the private sector.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: “The consensus always looked low, given the upturn in most indicators of hiring late last year and the improvement in macro indicators like industrial production, which feed into the ADP model.”
The data comes ahead of the Federal Reserve’s Open Market Committee (FOMC) meeting, where it is widely expected to leave its federal funds interest rate unchanged.
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Signs that the economy is still adding jobs even as unemployment remains at lows previously not seen since the global financial crisis will add to the FOMC’s belief that the US is nearing full employment, the point at which available labour resources are used most efficiently.
Higher employment levels are expected to add to inflationary pressures, which could prompt further calls for the FOMC to tighten monetary policy at a faster rate.
At its previous meeting the FOMC pencilled in three rate hikes over the course of 2017.