It may be wishful thinking, but December's employment report may finally show there's a turn in hiring.
CNBC.com
The ADP private-sector jobs report has given economists confidence to raise December employment forecasts, even though the number has been a less than reliable barometer for the monthly jobs report.
Several economists raised expectations Wednesday, after ADP showed a stunning 297,000 private-sector jobs were added in December.
Miller Tabak economist Dan Greenhaus now expects December non-farm payrolls of 170,000 to 185,000, from an earlier estimate of 160,000 to 170,000. The government data is released Friday at 8:30am ET.
"The variation between the real number and the expectation is very large," said Greenhaus.
"I don't want to say the number is suspect, per se...but any time you get that much deviation between expectations and the actual, it raises questions."
The ADP report was expected to show an increase in 100,000 private-sector payrolls, while economists had expected the government's December jobs report to show an increase of 140,000 non-farm payrolls, before the ADP data was released early Wednesday. The consensus is now 150,000, according to Dow Jones.
"Definitely in the last couple of weeks, we've gotten a series of better-than-expected data points that certainly reinforce the idea the economy grew quite nicely in the fourth quarter. I think that momentum is likely to carry over," Greenhaus said.
There has been a real reluctance by traders to put too much store in the December jobs report, despite the fact that it is the most anticipated number in weeks.
November's employment report was a shocking disappointment. It came in at 39,000 non-farm payrolls, well below the 149,000 expected by a consensus of Wall Street economists and below the lowest forecasts on the Street. The unemployment rate was also expected to hold steady at 9.6 percent, but instead it rose to 9.8 percent. A healthy string of data since that report has many economists suggesting it was an anomaly.
Last month's ADP number showed a gain of 93,000 jobs, also off target.
Barclays Capital chief U.S. economist Dean Maki said he does not rely on ADP for his forecast, but he expects to see 150,000 non-farm payrolls for December, with 165,000 in private-sector growth. "In the past, these big moves up and down in ADP have not correlated well," he said.
"I do expect that as we move through 2011, job growth is going to be running over 200,000 per month. It does appear that a boost in hiring is imminent. Whether that appears this month or not, it does appear imminent," Maki said.
Still, the ADP number is encouraging.
"At the end of the day, I didn't expect it. This is just unbelievable," Mesirow chief economist Diane Swonk said of the ADP report.
But "one month does not a trend make. Let's face it. Seasonals could affect it, but the trend is in the right direction," she added.
"If we add 200,000 jobs a month, it would still take 42 months" to recover losses."
"The interesting thing about this is the rebound in small-business hiring," she said.
Swonk now expects to see 200,000 or more non-farm payrolls Friday, and she said other data supports that view. She pointed to consumer sentiment, which showed a big move up in hiring expectations in December. "The percent increase in the expectations for job prospects was the strongest since 1983, which tends to signal a turning point."
The ISM Services Index, reported Wednesday, was the latest piece of better-than-expected data. It rose to 57.1 in December, up 2.1 points from November. A reading above 50 percent indicates growth. But the employment sub index decreased 2.2 percentage points to 50.5, indicating growth in employment but at a slower rate.
Greenhaus said he does not think that number takes away from the positive aspect of ADP's data, but he said the economy still needs to add far more jobs, even with the improvement.
"We lost 8.5 million jobs. If we add 200,000 jobs a month, it would still take 42 months" to recover those losses, he said.
Credit Suisse economist Jonathan Basile is forecasting that the economy added a total 185,000 jobs in December, including a 200,000 increase in private sector jobs, and including job losses from the public sector.
"It looks like this is a broad industry rehire. We've seen sales do better. There's no reason to think jobs won't follow that," Basile said.
Basile said the midterm elections may have helped encourage employers. "There's a friendlier fiscal backdrop," he said.
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