ADP Report Solid
The top economic reports of the week are the BLS and the ADP employment reports. The ADP report was good as it showed 190,000 jobs created. This is the third lowest growth in the past 12 months. Sustained growth below 200,000 would indicate the labor market has little slack to give. It wouldn’t be surprising to see this occur in 2018 given how low the unemployment rate is.
The mid-sized businesses led the way with 99,000 jobs created, followed by small firms with 50,000 jobs created, and large firms which had 41,000 jobs created. The service sector dominated the job creation with 155,000 jobs created, while the goods producing sector added 36,000 jobs. The three industries which hemorrhaged jobs were construction which lost 4,000 jobs, information tech which lost 13,000 jobs, and the other services which lost 2,000 jobs. It’s really difficult to make any sweeping judgements from these reports because they vary wildly. Even though we can’t extrapolate trends from one report, it’s still not good to see the information tech sector losing jobs because it consists of well-paying jobs. The education and health segment grew the most as it added 54,000 jobs.
The growth in education and healthcare jobs is evidence of the point I have made about productivity growth. The sectors which have productivity growth tend to need less jobs because tech makes workers more efficient. Eventually all we’re left with is education and healthcare which have lower productivity growth. There’s always going to be a certain number of teachers and doctors, regardless of the tools they use. Even though healthcare is getting better in terms of life expectancy, the cost is increasing as well. It’s an inefficient system which doesn’t successfully offer the proper incentives to lower prices. In fact, college tuition and healthcare are one of the biggest drivers of inflation. College might be getting better at teaching kids by utilizing technology, but the productivity of teachers doesn’t go up. The key overarching point to this is that the productivity growth might be in a long term trend lower. The low productivity growth doesn’t mean technology isn’t driving changes in the economy.
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