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By Jason Stipp | 03-02-2011 02:46 PM

Headwinds and Tailwinds for Friday's Job Report

February's report should be freer of negative adjustment factors and weather effects, but government layoffs may pressure job growth.

Jason Stipp: I'm Jason Stipp for Morningstar.

We got a very positive ADP employment report on Wednesday, but the government report is yet to come. Here with me to talk about what could be some headwinds and some tailwinds on that Friday government report is Morningstar's Bob Johnson, director of economic analysis, and Vishnu Lekraj; he is an equity analyst covering the employment sector.

Thanks for joining me, guys.

Robert Johnson: Thanks.

Vishnu Lekraj: Thank you.

Stipp: So, before we get to Friday, let's talk a little bit about the report we got on Wednesday from ADP. These are two different reports; they use different ways of calculating employment growth--we've talked about this in the past.

But the ADP report did look pretty good. What did you see, Vishnu, that you thought was a positive effect in the ADP report?

Lekraj: Huge positives that the small and medium-sized businesses drove the ball again down the field. They really grew, and they really were the main driver of growth this time around, which is very positive because, like I've said in the past, they usually lead us out of a recession. They start to spend more, they start to hire more, it builds more confidence into the economy, and to see them really do well after suffering so long over the past two years is very heartening.

Stipp: So, Vishnu, it seems that small and middle-sized companies are doing pretty well [in hiring]. What about the large companies? Are we starting to see any traction with them?

Lekraj: When you look at them, it's been pretty disappointing, because it has been stagnant for large businesses over the past year. I'd like to see that improve and see them start to add jobs because we do need them to start to improve in order for us to see some sustained robust job growth.

Stipp: Bob, when you looked at the ADP report, what positive trends that you see?

Johnson: Well, the most positive thing I looked at... you know I've been talking about the services part of the economy, which is obviously based primarily within the United States. And I love to see the services numbers go up. It's been one of the best numbers that we had--well over 200,000 jobs added in the services side of the house. So, that's been a laggard this recovery, both in terms of consumer spending and employment, so it's really good to see that number.

The other thing that I'd say was really positive in the ADP report is that it showed job growth of about 217,000, and that compares to something in the 180,000s last month. And the good news is that last month they didn't revise the number down, which we thought they might because the government number was so much lower, and so it was good to see that consistent pattern going on there.

In fact, if you look at the ADP report, the consistency of number was very important. I think that part of that is the way it's calculated. In the ADP report, if somebody is on the payroll, whether they get money or not, it still counts if there is a slot for them in the payroll report.

The government report only counts them if they get paid, which is part of why there were such a big divergence last month, and why maybe the government report might look better.

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