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By Jason Stipp and Vishnu Lekraj | 01-30-2013 12:00 PM

What to Watch in Friday's Job Report for January

We're expecting about 200,000 new private-sector jobs in January, but keep an eye on retail, finance, and government hiring.

Note: Director of economic analysis Bob Johnson, who normally joins this discussion, was traveling and unavailable for this interview.

Jason Stipp: I'm Jason Stipp for Morningstar. Ahead of the government's employment report for January, due on Friday, we got ADP private-sector employment data on Wednesday. It showed that 192,000 private-sector jobs were added to the economy in January.

Here to talk about that report and his forecast for the Friday report is Vishnu Lekraj, our equity analyst who covers the employment sector.

Thanks for joining me, Vishnu.

Vishnu Lekraj: Thanks for having me.

Stipp: So, let's talk about the 192,000 private-sector jobs in the ADP report. It was better than people expected. How did it come in, in your perspective?

Lekraj: It's been in line with a couple of trends over the past quarter. It showed some strength, but also showed some weakness within the economy, which goes hand-to-hand with some the GDP numbers we got earlier in the week. So, it wasn't that unexpected, but I'd like to see that number a little bit more robust than what it came in this week.

Stipp: So, let's talk about some of the drivers there. In the sectors, was there anything notable on what was added, what was subtracted?

Lekraj: Definitely. So the small businesses and medium businesses drove all the growth, and the larger businesses showed and drove all the weakness. Now, again, that goes hand-to-hand with the GDP number that came out that showed that we basically were flat for the fourth quarter of 2012, and that may give some credence to some folks who were concerned about the fiscal cliff and government spending, or the lack thereof, and businesses feeling constrained or uncertain about economic conditions given what the government is doing, [including] sequestration, and how that may affect consumer spending at the end of the day.

Stipp: So, we got some clarity on the fiscal cliff, part of it, but there are still some question marks out there. How much of that uncertainty overhang is gone now, in your opinion? Will we see larger companies begin to feel more comfortable to bring some of those workers on?

Lekraj: Right. So, there is a bifurcation, I believe, over the past month where smaller, medium-size businesses were dealing with increasing demand, and they had to hire to keep up with that demand. Larger businesses, on the other hand, saw the same type of demand, but were able to leverage and scale their operations, because they are in a better position to do so. So they weren't forced to hire as robustly as small and medium-size businesses.

That dynamic may start to change. You may see some larger businesses here have to start to hire as long as the consumer keeps on spending. And consumer spending, consumer sentiment, the way everyone's feeling overall about the economy in the U.S. and the direction we're headed is on the more positive track, which could lead to, again, more demand and more hiring down the line.

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