December Surprise? Jobs Report Reveals Major Gains at 2011 Year-End

Although job market gains are always welcome news, December’s phenomenal employment growth may be deceiving.

Payroll firm Automatic Data Processing (ADP) released its National Employment Report today, According to the ADP report, the U.S. economy gained 325,000 jobs in the month of December – approximately twice the size of the gain predicted by economists.

If the numbers hold, December’s employment figures will represent a substantial month-over-month increase, dwarfing the 204,000 private sectors that were added to the economy in November.

But many employment experts are cautioning against reading too much into December’s reported job gains. Last year, initial reports of radical job gains in December were eventually downgraded, based on a variety of seasonal factors.

Specifically, employers tend to maintain workers on payroll through year-end for tax purposes. After the calendar rolls to the new tax year, these workers are then purged from the official labor force, creating an artificial bump in December. Combined with the volatility that is normally associated with the holiday season, this payroll quirk is likely inflating the number of jobs that were actually added in December.

Real December gains are expected to fall in the neighborhood of 150,000 jobs – no small thing, but nowhere near the astronomical improvement identified in ADP’s original report.

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