Jack Dunn - Reclaiming Common Sense

This week is jobs week and the week of the State of the Union. Tuesday is the State of the Union address by President Trump. Wednesday is the ADP Jobs Report release day. Thursday we receive the weekly unemployment claims data. Friday we receive the Employment Situation Report, also known as the Jobs Report. It is important to note that we will see a bump up in the Unemployment rate and a most likely a drop in the participation rate because of end of the year closings of businesses and the end of the seasonal work. Last January we saw a smaller drop in non-seasonally adjusted workers (Current Employment Statistics) and a smaller drop in non-seasonally adjusted jobs (Current Population Survey) than expected. The seasonal factors were skewed high. This means that a net loss in workers was reported as a net gain, and a bigger gain than would have been reported during January 2016. The ADP payroll report should give us an idea as to which way the economic winds are blowing. The ADP number is only available as a seasonally adjusted number. What can we expect?


The January to January data indicates that we could see surges in the Education and Health Services and the Trade, Transportation, Utilities sectors. These two sectors have been dominant during the recovery. It is possible that we see net, year to year, January losses in Natural Resource (Mining and Logging,) Leisure and Hospitality, Professional and Business Services, and "Other Services." The growth appear to be a strong 200,000 jobs added, with a possibility of 225,000 jobs added. The annual ADP Growth rate was 2.23% during December. If we grow at 2.23% it will be a blow-out number If we grow as we did during January 2014 (2.04) or January 2016 (2.07%) then we will see 240,000 to 270,000.


The Month to month data indicates that we should see jobs added in every sector except Information and Technology.  The month to month data compares well with what we have been experiencing  on a regular basis. This was the strongest first year worker gains for any President since and including President Reagan, after eleven months. The trend is your friend. The trend for seasonally adjusted month to month growth falls in the range of 250,000 to 270,000. If you look at the month to month growth, as a whole, the data indicates 190,000 to 270,000 jobs will be added.


Net-Net there is a black box box scenario. If we look at the annual changes we could see some sectors surge and some sectors drop during January. If we look at the annual changes and annual growth we could see a strong jobs number or  a serious jump - remarkable, in fact. We could see month to month growth in virtually every sector. Is it sunny or is it cloudy? We will lose non-seasonally adjusted CES workers and we will lose non-seasonally adjusted CPS jobs .  This is "why" the data is seasonally adjusted. There would be not streaks in employment if the data wasn't seasonally adjusted.  The ADP could be a barn-burner of a report with 250,000 or more seasonally adjusted jobs added. Is a 300,000 number possible? Yes. It depends on the number of people working two jobs. Jobs could jump and workers might not grow as much because people are working multiple jobs. It depends in the revisions to the prior data. It depends on the seasonal factors used. The ADP data does not have a published non-seasonally adjusted component. It is a black box. If the prior data is revised higher by 25,000 jobs then this month will be reported lower by 25,000. Expect good news.


It's the economy.