Signs Say Terrible Jobs Report Ahead

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The official jobs report comes out this Friday. Expectations are for another slowdown, with about 175,000 jobs added, down from 199,000 in December. With everything that is going on, especially the number of people who have the Omicron variant and are presumably not at work, that would be a great result. Unfortunately, the real number is likely to be well below that and will probably be negative—maybe significantly so.

Bad News in ADP Report

We got a heads-up on that from yesterday’s ADP report, making a very weak result much more likely for the official jobs report on Friday. According to Capital Economics, the ADP report showed payrolls dropped for the first time since December 2020, down by 301,000. Job losses were big across the board. Leisure and hospitality jobs were down by a huge 154,000, which makes sense with the Omicron wave. But there were also losses in manufacturing, down by 21,000; transportation and utilities, down by 62,000; and construction, down by 10,000. Pretty much every sector showed meaningful losses.

When we look forward to what that means for the official jobs report this Friday, it gets worse. The ADP survey counts everyone on payroll as employed, regardless of whether they worked that week. But, with an estimated five million people isolating, some percentage of them will not be working. The official jobs report, which counts people as employed if they got paid during the survey period, could well show an even bigger loss.

If that percentage is around one-tenth, that could knock half a million people off the employed list—and give a seriously negative number for the month, potentially down by a couple of hundred thousand. That would not be good, and it is something we need to be aware of.

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