According to the ADP National Employment Report published Wednesday, private payroll growth closed out December adding 202,000 positions, against a consensus estimate of 157,000 among economists. ADP processes nearly a fifth of the nation’s payroll, which is their sample for their estimates. The Labor Department’s Bureau of Labor Statistics calculates estimates through a survey.
While ADP’s report often moves in tandem with the estimates published by the Labor Department, there was a divergence in this case. The just-published Labor Department figures have non-farm private payrolls increasing by 145,000 against expected growth of 160,000, with unemployment holding steady at 3.5%.
The unemployment rate is already below what the Federal Reserve defines as “full employment.” As such, most new jobs are coming from outside of the labor force. According to HiringLab: Workers who are outside the labor force have been the majority of people moving into jobs since the Bureau of Labor Statistics began tracking these flows. For example, recent graduates entering the job market and caretakers returning to paid work skip unemployment and move right into employment. What’s notable is how high this share of flows into employment has gotten. At the peaks of the economic expansions in 2000 and 2007, the share of flows into employment from outside the labor force only briefly got close to 70%. As of November 2019, it has moved all the way up to 74.3%.
The labor force participation rate stood at 63.2% as of December, and there is still room for growth. The economy headed into the 2008-09 financial crisis with 66% participation, and peaked in the 2000s at just over 67%. America’s unemployment rate is currently so low that it would have to nearly double to be on par with the European average.