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By Jason Stipp | 12-01-2010 12:15 PM

Jobs Momentum Should Continue

Friday's job report should show a continuation of the positive trends building in the employment market, say Morningstar's Bob Johnson and Vishnu Lekraj.

Jason Stipp: I'm Jason Stipp for Morningstar.

After a pretty good October jobs report, a lot of market watchers are going to be paying close attention to Friday's government data for the month of November.

Here with me to offer their take and whether they think the momentum can continue is Morningstar's Bob Johnson, director of economic analysis; and Vishnu Lekraj, an equity analyst covering the employment sector.

Thanks for joining me, guys.

Bob Johnson: Great to be here.

Vishnu Lekraj: Thanks.

Stipp: So we got a little bit of data on Wednesday, the ADP report, and they revised some numbers. Their headline number for November was actually a bit better than expected. Bob, what's your take on the headline from ADP?

Johnson: Well, I think, it's great to see because it shows an improvement from the prior month and they had a huge revision for the prior month. So, the ADP numbers historically have been light compared to what the government data comes out on Friday, so this is kind of viewed as a precursor to that, and they've been for many months in a row light on that number. So, certainly we'd expect better than that 90,000-some job growth when we see the number on Friday from the government, the one that really counts.

Stipp: Vishnu, underlying that headline number, what sort of trends do you see in ADP and what do those tell you about where we are?

Lekraj: A very good positive trend. When you take a look at what's driving the growth, it's the small- and medium-sized businesses, which again I've mentioned this before, they really drive a recovery especially in a job market during the early stages, and it's good to see an acceleration in that underlying trend.

Stipp: So although the ADP number has always been a little bit less than what we've seen in the government number as far as the number added to the payrolls, the trend that we have seen there, as you mentioned, is a positive one. Do you think that that momentum will continue? I know that we've kind of come into the holiday season when some hiring typically happens. I don't know what kind of adjustments they make, but do you expect that we'll some momentum going into next year?

Johnson: Well, I think, the short-term numbers are always a little dicey this time of year to call because we have holidays--like the November number, we're going to have the Veterans Day holiday and Thanksgiving kind of weighing on the numbers a little bit, so that kind of hurts the numbers. There are seasonal adjustment factors, but how they weigh in, who knows? And then on the other hand, retail hiring seems to be a little bit accelerated earlier in the season this year and that may show up in the November report.

But let's put those short-term things aside. I mean, I'm bullish going into next year. I think, we've cranked all we can out of productivity. I think that next year the hiring freezes has come off, the wage freezes has come off in many cases, and at the end of the year you have this kind of clean-up factor; I got to get the layoffs done, but I can't hire anybody until I get the actual money next year. So these next two months are a little bit hard to read a lot into. But even still, I'm expecting a good number here in November.

Stipp: Vishnu, it looks like we have a positive trend going. Do you expect this to continue?

Lekraj: Oh, definitely. When you take a look at the trend going back since the beginning of the year, you've seen a steady acceleration, a good improvement in the month-to-month percentage improvement in non-farm jobs, and I expect that to continue well into 2011. There could be some noise, like Bob said, over the near term, but longer term I'm expecting some moderate growth. Towards the end of 2011, it's not going to surprise me if you see some really robust growth towards the third and fourth quarter.

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