Reclaiming Common Sense

Payrolls should have grown December to December in all sectors,

except possibly one sector

The first week of the month is normally the week that we receive the monthly ADP Payroll Report and the Monthly Employment Situation report, or Jobs Report. We normally receive the ADP report on Wednesday and the Jobs Report of Friday. This week we will receive the ADP report on Thursday. There is a question if the Government Shutdown will delay the release of the Jobs Report.

The ADP report measures private sector payroll growth. The Jobs Report is created using two data sets. The Current Population Survey (CPS) measures full-time jobs, part-time jobs, unemployed workers, and the workforce. The Current Employment Statistics (CES) data measures workers. The headline number is normally the "Non-Farm Payroll" number. This includes government workers. The data used for former President Obama;'s "Job Streak" was the total private sector worker data. The three data sets measure different things and have different sample sizes. They also have different seasonal factors. The ADP data is only available in the seasonally adjusted format. The CPS data and CES data are available in seasonally adjusted and non-seasonally adjusted data sets.

The ADP Payroll data have been growing at the fastest pace since 2015. The rate of growth was declining from 2014 through 2016. The thing here to remember is that there was a massive revision to the data with the release of the February ADP report. Growth from 2017 and 2018 were shifted back to 2016 and 2017, making 2016 appear better than it was, reducing the growth during 2017, and making 29018 appear as if it was starting off slower than it was.We have added roughly 2.211 million payroll positions through November. We added 2.143 million through November 2013 and 2.252 million through November 2015.  We have added roughly 201,000 payroll positions every month this year. We added 283,000 during December 2015 and 157,000 during December 2013. If we split the difference then we could add 220,000 payroll positions.  The Current Year data indicates that 201,000 should be the floor, 240,000 could be the ceiling, and 220,000 is doable.

The Rolling Year data indicates that we should poke through 2.00%. The December 2016 data was anemic at 1.71%. If we grew at that rate then the "jobs streak" would end. December 2017 was significantly better than December 2016. If we grew at that rate then we would only add 55,000 payroll positions. It is expected that we will grow between 1.94% and 2.03% and add between 218,000 and 331,000 payroll positions this December based on the annual growth. If we just grew at the rate we did during November this year then we would add 256,000 positions.

One Sector should drop December to December. The biggest growth December to December is Expected in Professional Business Services, Natural Resources, Construction, Education/Health Services, and Leisure/Hospitality.  Will we see growth in Natural resources with dropping Gasoline Prices? Probably not. Will we see a drop in Information and Technology? Probably So. We could see gains December to December across the board. Expect the largest gains in  "Professional Business Services (PBS,)" "Natural Resources (NR,)" "Construction," "Education and Health Services (EHS,)" and "Leisure Hospitality (LAH.)"  Expect a number between 218,000 and 256,000 based on the December to December data.  Expect a number around 237,000.

The Month to Month Data indicates that we should grow faster than we did during November. If we just grow at 0.15% November to December then we should add at least 191,000 payroll positions. The top range is probably 0.20% or 0.21%, in which case we would see 255,000 to 268,000 payroll positions added. If we grow as we did during 2013 then we will add 178,000 workers. If we grow as we did during 2015 then we will add 293,000 payroll positions. Split the difference we hit 235,000.

The Month to Month data indicates the possibility for up to three sectors will trim payroll from November's levels. It is almost certain that "Information" will trim payroll. We could see "Other Services" and "Natural Resources" trim their payrolls. The Largest gains should be in PBS, EHS, LAH, OS, and NR. The month to month growth projects 204,000 to 268,000. Expect a number around 230,000.

The different metrics are indicating slightly different options. This could be a blow-out number and exceed 300,000 payroll positions added. That is unlikely. The seasonal factors could reduce that enthusiasm. The pessimistic data, trend is the friend, current year data is "stuck" at 201,000. That data is pointing towards 220,000 payroll positions added. The month to month and December to December data are pointing toward 235,000 positions added.Expect a number around 211,000 to 230,000.

Will there be Jobs Report this month? Nothing is going to happen in Congress until after the Democrats take office on January 3. The report is due on the 5th. Will the authors of the report be deemed" essential or non-essential" workers? This column will produce a forecast article.

It's the Economy.