U.S. jobs growth may be going to another level

The job market looks to be picking up steam and shaking off any hints of the slowdown economists predicted would happen as employers got further away from the boost of the Tax Cuts and Jobs Act of 2017.

What happened: ADP's private payrolls report showed the U.S. added 291,000 jobs in January, beating expectations by a wide margin for the second straight month. It was the report's best monthly gain since May 2015.

Why it matters: The unexpected surge suggests U.S. economic growth may not be slowing down and the expansion may be entering another phase of growth that leads to an unemployment rate below even the 50-year low seen in 2019 and further wage increases for American workers.

• The economic recovery is already in its 11th year and is defying the orthodoxy of traditional economics that says job growth slows when the unemployment rate falls below 4%.
• Despite firms' continued hiring and the highest wage growth in close to a decade, inflation has not risen above, or even to, the Fed's 2% target rate, allowing the central bank to keep interest rates low.

What they're saying: "We are starting a new positive trend," Steven Skancke, chief economic adviser for investment manager Keel Point and a former Treasury Department official, tells Axios. "I don’t think it’s an outlier and maybe some amount of this new trend is being boosted by the rebound of ending the [GM] automotive strike and the de-escalation of trade tensions."

Yes, but: The report may be a fluke or an outlier, warns Moody's Analytics chief economist Mark Zandi, who helped construct the report in concert with ADP.

• "Growth is slowing," he tells Axios. "We’ve been barely growing 2% over the past year and the first part of this year is going to be weaker because of the [coronavirus outbreak] and the Boeing 737 MAX shutdown."

The big gains are largely the result of warmer weather this winter, Zandi argues, pointing out that job gains in ADP's survey were led by the leisure and hospitality sector.

• Then there's the announcement from the Bureau of Labor Statistics that 501,000 fewer jobs were created between March 2018 to March 2019 than officials had initially estimated.

The bottom line: There is good reason to watch Friday's U.S. nonfarm payrolls report from the Labor Department.

• The two have historically moved together, but in the last few months, ADP's report has moved in the opposite direction of the government's, most recently showing 202,000 jobs created in December, while the BLS report delivered an underwhelming 145,000.

Go deeper: Women outpace men on U.S. payrolls