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By Jason Stipp | 02-03-2011 11:27 AM

Employment's Time to Shine

Friday's job report along with those that follow in the next few months will be particularly important economic indicators.

Jason Stipp: I'm Jason Stipp for Morningstar. After a mildly disappointing December government job report, do we have reason for higher hopes for January's report?

Here with me to dig into that is Morningstar's Vishnu Lekraj. He is an equity analyst in the employment sector. And Bob Johnson; he is our director of economic analysis.

Thanks for joining me, guys.

Vishnu Lekraj: Thanks.

Bob Johnson: Thank you.

Stipp: So this report comes out on Friday. I know that we've talked a little bit about some signs of hope that we'll hopefully see in the January report, now that we've come into the New Year.

I'd like to kick it off and talk a little bit about ADP and what we saw in the ADP report. Bob, are you seeing some signs from ADP that we could have that bump up in January that you're hoping for?

Johnson: Well certainly ADP said we were going to have a good month last month and that turned out to be dead wrong. So, we're little bit more hopeful this month.

They did show job growth again in the ADP report for the month of January--not quite as robust this December, but still a very robust number at 187,000. So, a good number from that report, but again that hasn't tracked the payroll data particularly well lately.

There was one thing in there, though, that I really did like. It showed a pick-up in small business activity, and that's been something that's really been a laggard, and it blends with some of the stuff we've seen from the Fed, where some of the lending standards seem to be softening just a little, and that may encourage the small businessmen just a little bit.

Stipp: Vishnu, ADP hasn't been the best gauge of what's going to happen in the government report. You guys have made that point several times in the past. Is there anything in ADP, though, that you think offers some good signs for what we might see on Friday?

Lekraj: It may not be exactly right, but the trends coming out of the report you can take a look at and formulate kind of what's happening. And it's very good. We've seen a developing trend over the last two months, including this one. You've seen small and medium-size businesses pick up hiring activity. If you chart it out, you can see a good spike over the past two months.

Coupling that with what I have heard from Paychex, which does a lot of payroll processing for small and medium-size businesses, gives me good encouragement, because Paychex has been reporting very good numbers, and they're really encouraged over the next year.

Stipp: Bob, looking at initial unemployment claims over the last few weeks, how might they affect what we see in Friday's report?

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