Jack Dunn - Reclaiming Common Sense

Expect Growth Comparable to 2005, 2011, 2012

The ADP payroll report precedes the release of the monthly Employment Situation report, or Federal Jobs Report. The ADP report is released the Wednesday before the Friday Jobs Report date. The two reports should reconcile with each other. They normally are at least pointing in the right direction. When the Jobs report said the Private Sector Job Creation sector streak ended during September, ADP had already relayed that the growth was continuing. It was not a surprise when the Jobs streak was revised with the September data was revised higher. The growth rate for this year, according to ADP data, is over 2.00%. This is important. Growth can be examined on a month to month basis and an annual basis.

ADP Should report month to month, seasonally adjusted growth in Seven of Ten Sectors. Remember that the ADP data does not include the Government Sector jobs and parallel the Private Sector Data, not the non-farm payroll level. The only sectors that appear to show potential declines are "Natural Resource," "Information Technology," and the "Other Service" Sectors. Construction should improve, as should Education and Health, Leisure and Hospitality, Trade, Transportation, and Utility, Manufacturing, and the Professional Business Services sectors.

If we grow month to month as we did during prior years, we could add up to 300,000 jobs. We saw annual growth rates during December 2005, 2011, 2012, 2014 and 2015. We would need a huge spike in growth to hit the 2014 level of growth. The more tempered rates of growth project a seasonally adjusted growth of 246,000 to 267,000 jobs. Anticipate a number close to 250,000.

If we grow at an annual rate similar to prior Decembers then we should see the addition of 200,000 to 280,000 jobs. The data here is a little crazy. There is the potential for a 499,000 number based on the growth rate of 2011. That is not going to happen - most likely. Split the difference between 200,000 and 280,00 and expect a number close to 240,000. The annual rate of growth tells us where we have been. The annual growth rate gives us a lower value that then month to month change. Expect the final number to be over 260,000 and approaching 300,000.

The data available from ADP is a seasonally adjusted data. There is not a published data set of non-seasonally adjusted data available. The seasonal factors change month to month and year to year. The seasonal factors that are used in the Current Population Survey data, the jobs data, differ from those in the Current Employment Statistics, CES, Worker data. Those factors change month to month and year to year. The sample size is different for the ADP, CPS, and CES data sets. Different sample sizes mean differing levels of margin of error. Then there are the revisions to prior data. If the data from prior months is downwardly revised then this month gets a "larger than expected pop." If prior data is revised higher, a good thing, that will slightly deflate this month's balloon. Watch the sectors. Watch the revisions. Watch for the differences between ADP, CES, and CPS. Remember, the Jobs Forecast article projected a value between 224,000 and 310,000, depending on the seasonal factor used to convert the non-seasonally adjusted data to the seasonally adjusted data.

It's the economy.