UPDATE: ADP Report Sets Stage For Modest January Payrolls Gain

The increase in private-business hiring in January met expectations, according to a report released Wednesday, with small-business hiring fueling the gain.

Private-sector jobs in the U.S. rose 170,000 last month, a report by payroll giant Automatic Data Processing Inc. (ADP) and consultancy Macroeconomic Advisers said. The figure matched forecasts by economists surveyed by Dow Jones Newswires. The December data were revised lower to a gain of 292,000 from 325,000.

Joel Prakken, chairman of Macroeconomic Advisers that compiles the data for ADP, said job gains have ranged between from 150,000 to 200,000 for the past few months. It a "slow and steady" pace that could bring down the unemployment rate, but not rapid enough to return payrolls to their pre-recession peak any time soon, he said.

The ADP survey tallies only private-sector jobs, while the Bureau of Labor Statistics' nonfarm payroll data, to be released Friday, include government workers.

Economists surveyed by Dow Jones Newswires expect total nonfarm payrolls rose by 125,000 in January, a slowdown from the 200,000 added in December. The January unemployment rate is expected to remain at 8.5%.

Because it matched expectations, the ADP measure is unlikely to cause economists to alter their payrolls forecast. Indeed, many economists aren't sold on ADP's predictive value for the payrolls number.

Economists at Credit Suisse say the ADP's first number for private-jobs gains before revisions has overshot the government's tally by an average of 62,000 over the last three months.

The latest ADP report showed large businesses with 500 employees or more added just 3,000 employees in January, while medium-size businesses added 72,000 workers and small businesses that employ fewer than 50 workers hired 95,000 new workers.

Prakken said the gains at small- and medium-sized businesses are encouraging because they historically are the big job creators in the U.S.

Service-sector jobs increased by 152,000 last month and factory jobs increased just 10,000.

ADP, of Roseland, N.J., says it processes payments for one in six U.S. workers. Macroeconomic Advisers, based in St. Louis, is an economic-consulting firm.

In another job-related report released Wednesday, TrimTabs Investment Research estimated only 45,000 new jobs were created in January. TrimTabs pointed to a drop in withholding tax collections in January as the cause for the expected slow hiring.

"While some of that decline is likely due to lower Wall Street bonuses this season relative to last, it appears that the balance of the decline is likely due to weaker job growth," the report said.

ADP also announced that it would release annual revisions to its job data on March 7. One goal of the revisions is to better match the ADP data with the BLS's job numbers.

-By Kathleen Madigan, Dow Jones Newswires; 212-416-2466; kathleen.madigan@dowjones.com

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