Private sector employers added 250,000 jobs last month, according to payroll giant ADP, as businesses took advantage of the roaring economy and the prospect of tax cuts in the New Year.
Small businesses added 94,000 jobs in December, including 43,000 at businesses with between one and 19 employees, and 51,000 at companies with between 20 and 49 employees.
Midsized businesses with between 50 and 499 employees added 100,000 jobs in December. Large businesses added 56,000 jobs in December, including 25,000 at companies with between 500 and 999 employees, and 31,000 jobs at businesses with 1,000 employees or more.
“We’ve seen yet another month where the labor market has shown no signs of slowing,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, in a statement. “Throughout the year there was significant growth in services except for an overall loss of jobs in the shrinking information sector. Looking at company size, small businesses finished out 2017 on a high note adding more than double their monthly average for the past six months.”
The goods-producing sector added 28,000 jobs last month, while the service sector added 222,000 jobs. That included 72,000 jobs in professional and business services, such as accounting, tax preparation and other types of services. Franchise jobs increased by 27,300.
Mark Zandi, chief economist at Moody’s Analytics, which compiles the monthly national employment report with ADP, believes accountants will be in heavy demand this year. “I expect it to be a busy year for accountants as everyone adjusts to the new tax law,” he told Accounting Today. “The law simplifies the tax code in some ways, such as reducing the number of taxpayers that itemize, but it complicates it significantly in other ways, such as the new rules regarding pass-through entities. Accountants should be in big demand this year.”
The retail and transportation sectors stood out in particular in December, including jobs delivering packages for the holidays. “The increase in retail may reflect the impact of the tax cuts, so I think there may be some anticipatory spending going on with regard to the tax cutting,” Zandi said during a conference call with reporters Thursday. “Of course the stock market has been surging pretty significantly since last month in anticipation of the corporate tax cuts. There’s a relatively healthy wealth effect where rising stock wealth is improving confidence in stockholders and that’s causing them to spend more out of their income. Saving rates are down, and they’re spending more aggressively, and that goes to the strong Christmas sales and the strong retail employment.”
He sees a strong correlation with Congress moving the Tax Cuts and Jobs Act to passage last month. “My sense is that the tax cuts probably have their fingerprints on the employment numbers,” said Zandi. “I think we should continue to see relatively strong employment numbers and economic growth through the first couple or three quarters of 2018 as the tax cut effect filters through the economy. By my estimate the tax legislation will lift real GDP growth by 0.35 percentage points. I’m looking for 2.9 percent real GDP growth during the year, so that means without the tax cuts, growth would have been closer to 2.5 to 2.6 percent. It’s still a good year, but 2.9 percent is a very strong year.”