Reclaiming Common Sense

January ADP Report Released this Wednesday

Potential is for a Strong January before they release revisions next month

The ADP Payroll report on Private Payroll creation and losses is released prior to the monthly government Employment Situation Report, or jobs report. The January Jobs Report came out with a revisions to the prior years data, plural. The ADP report posts its revisions to prior years data with the release of their February Jobs Report. What was reported this month?

All of the data was revised. This makes a big difference  when trying to project month to month and February to February Changes based on prior growth rates.  Most notably the data from September 2017 was revised from +111,000 to (-)39,000. Did the private sector ADP streak really end? The ADP Archive only has the reports for 2019 and 2020 available on their website.

The Month to Month data was expected to grow by 0.16% to 0.20%. The sectors with the largest expected growth rates were Construction, Manufacturing, Professional Business Services (PBS,) Other Services (OS,) Financial Services (FIRE,) Leisure and Hospitality (LAH,) and Education and Health Services (EHS.) Natural Resources  could have gone either direction.

The headline ADP Number was 183,000. This was an "increase" from last year's revised 153,000 positions and a slight drop from last month's downward revised 209,000. This was a miss. We saw month to month lines in declines in Natural Resources (M/L,) Manufacturing (0.03%) and Information (0.08%.) The largest growth was reported in LAH, Construction, PBS, OS, and FIRE. This was only a month to month growth rate of 0.14%.

The February to February  data is pointing toward  A growth rate of . 1.52% to 1.58%. This is very low for an expanding economy.  The sectors that were expected to have the highest growth rates were Natural Resources (M/L,) Construction, PBS, LAH, EHS, FIRE and TTU.

The February to February Growth was largest EHS, LAH, PBS, Construction, and TTU. The annual growth rate was only 1.48%. A person could probably spend days researching the changes in the data set. There were February to February declines reported in M/L, Manufacturing, and IT.

We saw revisions to the data mean that growth has been slowing since 2014.  This has not always been the case. The data from 2009 was revised lower than it was reported just last month. The data for 2008 was revised higher which amplified the change to 2009. The data from 2016 was revised upward, meaning it was better than was originally reported. The data from 2019 and 2019 were both revised lower - roughly by the amount that the Current Employment Statistics data was revised just last month.

Different Data Sets - Different things being measured.  The ADP Private Sector Payroll data is different from the Current Employment Statistics headline Non-Farm Payroll (NFP) data. The CES NFP data on workers and wages is different from the Current Population Survey (CPS) data on full-time jobs, part-time jobs, unemployed workers and the workforce population data. The CPS unemployment data is different from the weekly continuing claims data. The CPS data, the CES data, and the Unemployment claims data is all different from the JOLTS data. Compare the different data sets, with different sample sizes, measuring different categories, with different margins of errors, at your peril.

It was expected that  all sectors except Mining and Logging (Natural Resources) would grow month to month. It was expected that  all sectors would add payroll positions February to February.  Last month we started at our best pace since 2006, according to the ADP Payroll Private Sector data.  This month the data was "Coronavirus proof*." The influx of cases started well after he data for February were collected, plural. The revisions to 16 years of data made the anticipated changes "irrelevant." Expect that September data to be revised once someone calls out the revision of 150,000 payroll positions.

It's the Economy.

(*More people have been shot in Chicago since the first of the year than have the Wuhan Virus in the United States. More people have dies of gunshot wound in Chicago this year than have died of the Wuhan Virus in all of the United States.)