Reclaiming Common Sense

The ADP Payroll report is released the Wednesday preceding the Federal Jobs Report, or Employment Situation Report. The ADP report only provides seasonally adjusted (SA) private sector payroll data. The headline "jobs number" is the seasonally adjusted non-farm payroll (NFP) Current Employment Statistics (CES) worker data. The NFP data includes the government sector data. This means that the number that is the best comparison is the SA Total private Sector CES data. The CES and ADP samples are of different sizes which means that there is "always" some variation between the ADP number and the CES number.

The August ADP forecast article examined the possibilities for the August payroll number based upon month to month changes and rolling year changes for the month of August. It also looked at the data by sectors.

  • The month to month data was projecting a monthly growth rate between 0.16% and 0.19%. This means that 199,000 to 239,000 payroll jobs added to the economy, ore-revisions to the prior data. It also projects growth in all sectors except possibly construction.
  • The August Rolling year growth data, projected a range of growth between 1.87% and 1.97%, meaning an addition of 200,000 to 312,000 payroll positions. All sectors should be higher than they were last August. It is possible for a minor contraction in Natural Resource (the equivalent of Mining and Logging in the CES data,) and possibly weakness in the IT sector.

Another way to look at the data is how we are doing compared to other years. Right now we are trending between 2013 and 2015 for total seasonally adjusted payroll growth.  We had added 1.447 million payroll positions through July this year. We had added 1.262 million jobs through July 2016, 1.317 million payroll positions through July of 2013, 1.361 million through July 2017, 1.494 July 2015,, and 1.622 million during 2014. We are ahead of where we were during August of 2016 during July of 2018. This is impressive considering the revisions to the ADP data that were undertaken earlier this year. The Current Year data pegged a possible growth between 218,000 and 252,000. What was reported in the August ADP Report?

The month to month growth was better than 2016 and slower than 2017. The drop in growth from July to August was expected. It was not expected that the growth rate would be lower than the majority of growth rates from 2012 through 2017. Month to month all of the sectors added their payrolls except Natural Resources. Construction was up. Manufacturing was up. Professional and Business Services were up. The largest growth rate was in Information.

The rolling year growth was the same as it was during June and July. This column projected a range of 1.87% to 1.97% and it came in at 1.85%. All sectors added to their payrolls over the past year except Information. Ironically, the fastest growing sector was Natural Resources, followed by Construction, Professional Business Services, Leisure and Hospitality, and Manufacturing. It is very interesting that the best month to month growth rate was IT and the worst annual growth rate was IT. It is interesting that the best year to year growth rate was Natural Resources and the worst month to month growth data was Natural Resources.

The current year data is still trending with 2006 and 2013. We are adding more to the payroll than 2016 and 2017 and fewer payroll position than 2014 and 2015. Will we add more than 2 million seasonally adjusted payroll positions this year? We should..

We added 2.07 million payroll position during 2016, another 2.3 million during 2013, another 2.525 million during 2015, and another 2.817 million during 2014. If we continue trending with 2016, and we stay ahead of it, this will be a solid year.

Workforce Vitality. An interesting report that was discovered while waiting for the ADP Payroll Report was the ADP Workforce Vitality Report for the second quarter of 2018. This article was released on July 25, 2018.  The headline was that Wage grew at a rate of 3%. The "Job Switching Rate" was at over 20% with the highest switch rates in the Leisure and Hospitality Sector, the Professional Business Services, a the Trade, Transportation, Utility (TTU) sector. These are three of the largest "Quits" sectors in the monthly JOLTS report. These are three of the lowest wage sectors according to the CES data and the ADP data. The ADP data has Information, Resources and Mining, Manufacturing, and Construction as the top four hourly wage sectors.

Will we see IT CES improve tomorrow or contract? Will we see TTU contract or expand? Different surveys. Different Results. Even though this number came in lower than this column projected, it still was a "Goldilocks" number. The official 163,000 payroll jobs added was slightly lower than August 2017 at 170,000. Will we do better this September than last September? Sometimes a slow month is offset by fast month the following month. The recent article "Chicken Little Economists" said "one month does not make a trend." Three months at 1.85% annual growth is a trend.

It's the economy.