• Private-sector increased by more than 800,000 in December, according to data from payroll-processing firm ADP.
• Job growth was strong across industries and firm sizes.
• PNC expects December job growth of 425,000 in the government’s jobs report, to be released Friday. The strong ADP report adds upside potential to the PNC forecast.
• Preliminary BLS job numbers have been disappointing in recent months, but there have been large upward revisions in subsequent months, painting a better picture of the labor market.
• The omicron variant did not impact the December jobs numbers but could be a drag on job growth in early 2022.

U.S. private-sector employers added a net 807,000 jobs in December, according to the ADP National Employment Report, based on records from the payroll-process firm. This was the biggest increase in employment in the ADP survey since May 2021. The Bureau of Labor Statistics releases the government’s official jobs report on Friday.

Goods-producing industries added 138,000 jobs over the month, with big gains for both construction and manufacturing. Private service-providing industries added 669,000 jobs, including an increase of 249,000 in leisure/hospitality services, which continues to recover from a huge contraction in the early stages of the pandemic. There were also employment increases of better than 100,000 in trade/transportation/utilities and professional/business services, as well as an increase of 85,000 in education/health services.

Firms with fewer than 50 employees added 204,000 jobs over the month, while those with 50 to 499 employees added 214,000 jobs. Those with 500 or more employees added 389,000 jobs in December.

The ADP jobs report was very strong in December at 807,00, well above the consensus expectation for an increase of 400,000. The big gain in employment in the ADP survey adds upside potential to PNC’s forecast for job growth in the BLS’s December report (to be released Friday morning) for a gain of 425,000 jobs, including 400,000 in the private sector. The U.S. economy added just 210,000 jobs in November, according to the BLS, but there have been big upward revisions to the preliminary estimates in subsequent months recently as employers provide more complete information to the BLS. PNC is expecting an upward revision to November job growth on Friday. And if the initial December number comes in weaker than expected, it is likely to be revised higher over the next couple of months.

The U.S. labor market continues to recover from the Viral Recession. After job losses of 22 million in March and April of 2020, the economy has added back 18 million of those jobs through November, although that still means that employment is down by almost 4 million from before the pandemic. A big constraint on hiring is a shortage of available workers. There were 2.5 million fewer workers and potential workers in the labor force in November 2021 compared to before the pandemic, due to a combination of early retirements; concern about the coronavirus; childcare and schooling problems; and extra income from government assistance, which has made some potential workers choosier in taking a job. However, the labor force increased by 600,000 in November, which could be the start of a stronger recovery in the pool of available labor.

However, the omicron variant is a substantial downside risk to the near-term labor market recovery. The data in the BLS report were collected in the second week of December, and so omicron is unlikely to have shown up in the December jobs data. But uncertainty surrounding omicron could be a drag on job growth in early 2022.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.