Jack Dunn - Reclaiming Common Sense

The first indication of what we might be able to expect from the monthly employment situation report is the ADP payroll report. We had seen strong annual growth during the past year until the ADP payroll data was revised with the February ADP Report. The ADP payroll numbers were growing at a rate of over 2.00%. This will be important later in this article. The Payroll number closely resembles the total private sector Current Employment Statistics worker data, as it does not include government data, nor does it delineate between full-time jobs and part-time jobs. The NSA CES data indicates that we could see over 1.0 million non-seasonally adjusted CES workers added to the economy. The data indicates that we could add as many as 1.2 million NSA CES workers.

Unfortunately the ADP data is only available as seasonally adjusted jobs. The SA CES data indicates that a number of over 300,000 SA workers could be added this month. Some months are better than others, even during strong growth periods, as measured by a rolling average growth rate. The month to month ADP data paints one picture. The annual growth rate data paints a slightly different picture.

The Annual Growth rate for March 2018 was better than April 2017. The fact that the growth rate was better than last April is important to note considering the massive downward revisions for 2016 and 2017 that had been previously reported. If we only grow at 1.85% then it is possible that we would have a very weak ADP payroll number of only 136,000. If we see a growth rate of 2.00% then we could see a seasonally adjusted ADP number of 325,000 jobs. This is in keeping with the SA CES possibilities. We were growing at 2.27% during January, prior to the revisions. That would be huge this month. It would be one of the best April months ever, going back to 2003. I cannot see how we would add close to 700,000 ADP jobs in one month. It is possible. We would not even know if it happened, as the seasonal factors and non-seasonally adjusted data is not published. Expect a number over 200,000 and under 325,000 using the annual growth method. Shoot for 264,000.

The monthly growth rate could be 0.16% to 0.20%. If we took an annual  rate of 1.8% and divided that by 12 months the rate would be just under 0.15% a month. If we took a rate of 2.0% then the monthly growth rate would be just over 0.16%. If we thought that we were still growing at 2.20%, the monthly rate would be roughly 0.18%. If we thought that we could strip some gears and jump back on track to a growth rate of 2.4%, picking up where January was reported and improving for two months, then that monthly rate would be just under 0.20%  The month to month rate skews the data low with a number under 250,000 and as low as 150,000. The monthly rate for December, January, February, and March have been either 0.19% and 0.20%. If it edges higher to just 0.21% then we could see a number around 265,000 jobs.  Expect 0.21% . Expect 265,000.

Could all sectors add to their payrolls this month? The data also indicates that on a month to month basis that all sectors should add to their payroll, with the possibility of a slight decline in Construction. This is unlikely due to the recent New Construction report with increased starts and increased completion, and an increased number of units month to month and March to March. The April to April changes indicate that all sectors should add to their payroll with the possibility of a reduction in payroll for natural resources. This also seems unlikely due to the increase in construction requiring more timber and also due to the increasing rig counts for drilling.

According to the ADP report for March 2018 we have been adding 241,000 to 249,000 seasonally adjusted payroll workers during the past four months. It would be really easy to say that we should expect a number of 245,000. The recent drop in continuing unemployment claims, plus the normally sky high 1.0 million April NSA CES jobs being added during April 2014, April 2015, April 2016, and April 2017 makes it seem like a number over 265,000 may be possible. According to the revised data there were 280,000 jobs added February of 2017, 312,000 added May of 2015, and 321,000 jobs added during April of 2014, so a number over 250,000 and under 325,000  is a possibiilty.

It's the economy.