Reclaiming Common Sense

Month to Month ADP Growth - all except IT and Natural Resources

August to August Growth should be in all sectors.

The monthly ADP Payroll report is released the Wednesday prior to the release of the Government's Employment Situation Report. The ADP Payroll data is private sector and seasonally adjusted. The Employment Situation report has non-farm payroll as the headline number. The private sector data is a different number. Both the NFP and Private Sector have seasonally adjusted and non-seasonally adjusted components. There are at least three ways to examine the data: Month to month growth, Same month to same month growth or Rolling Year Growth, and Current Year growth

The month to month growth pointed towards growth in all sectors except possibly Information and Construction with possibly 127,000 to 216,000 seasonally adjusted payroll positions added this August. The Rolling Year data is projected growth in all sectors from last August. The sectors with the largest growth rates are expected to be in M/L, PBS, Construction, Leisure and Hospitality (LAH,) and TTU with annualized growth between 1.70% and 1.77%, with the creation of 153,000 to 216,000 payroll positions this month. Both measures overlap between 153,000 and 216,000. This would indicate that we should expect a number around 185,000 positions added. The current year data is trending with the trajectory of 2013 and 2016, meaning that we could have expected 192,000 and 206,000, or 199,000 seasonally adjusted payroll sector positions reported as being added this August.

The seasonally adjusted month to month growth was reported at 0.15% or 195,000 payroll positions.  We saw month to month increases in payroll for all sectors except Mining and Logging (Natural Resources) and Information (IT.) The largest growth was recorded in Education and Health Services (EHS,) Leisure and Hospitality (L/H,) Other Services (OS,) Professional Business Services (PBS,) and Trade, Transportation and Utilities (TTU.) This is good news for the JOLTS job opening data. The three sectors with the most job openings, hires, separations, and quits have been L/H, PBS, TTU, and EHS. It also may skew the wages data tomorrow because TTU, EHS, OS, and L/H are the four lowest paying sectors.  It is anticipated that there will be hourly annual wage increases across the board. Will we see hours worked increase as well?

The seasonally adjusted August to August growth was up to 1.74% from 1.71% last month.   One month is not a trend. The ADP growth last year was over 2.00% for an extended period of time. The Mining and Logging sector and the IT sector are both down from last year's levels. The largest growth rates annually were in Construction, PBS, EHS, LAH, and OS. The construction and PBS growth may boost the hourly earning average.

The current year growth is still trending with 2016. The thing to remember here is that growth that could have be attributed to 2019 were shifted backwards with the release of the February ADP report. The revisions this month were downward by 14,000 for July and down 5,000 for July. This means that there was a net 5,000 boost for August. The 195,000 number could have been reported at 190,000 without any revisions. This column had warned of revisions in the range of plus or minus 30,000 positions, so this was tame.

Our annual rate of growth is better than it was during August of 2017. This is just one month. Will we see the annual growth rate rise during September? The economy is behaving within expectations. Will employers base their hiring decisions on the national economy, and the national media, or on their needs? We will see this Fall and Winter. Will this be the first media created recession? Not if they pay attention to the data instead of the headlines.

It's the Economy.