Last week ADP (NYSE:ADP) released its December 2011 employment report indicating the largest jump in employment in the year. According to the report, private-sector employment grew by 325,000 jobs from November to December across the nation. Service industry was the largest contributor creating 273,000 new jobs.  Payrolls in the goods-producing industries increased by 52,000 employees, including 22,000 in the manufacturing sector.
As a result of the increase in hiring, the unemployment rate in US dropped to 8.5% in December 2011, the lowest since March 2009.  This drop in unemployment is a good sign for US economy as well as payroll processing service providers like ADP and Paychex (NASDAQ:PAYX).
We currently have a $57.67 Trefis price estimate for ADP.
Small Business Driving Employment Growth
By the size of the employer, small businesses (those with less than 49 workers) created the most jobs in December with employment on small payrolls rising 148,000. Mid-size businesses (those with 50-499 workers) also contributed significantly to employment growth with employment on medium payrolls up 140,000 during the month.
This is precisely why ADP is focusing on small businesses. In the last year, ADP has expanded its service offerings to the segment. With small businesses leading the trend towards increasing mobility, ADP launched its popular payroll management platform for small business on the iPhone as well as Android smartphones.
As ADP continues to expand and refine its services to better cater to small businesses, we expect, its number of small business clients to increase in the future.Notes: