Reclaiming Common Sense

  Private Sector Payroll - Playing Poker with the Friday Jobs Report

The January ADP Private Sector Payroll report is set to be released this Wednesday. The January Employment Situation Report, which publishes private sector and non-farm payroll data, is scheduled for Friday. The ADP data is seasonally adjusted "jobs" data while the Current Employment Statistics (CES) worker data is available in seasonally adjusted and non-seasonally adjusted formats. There is also the Current Population Survey (CPS) data on jobs, workforce population, and unemployment. Three data sets. Three different numbers for employment in the United States.

A review. Last year the ADP payroll report was released prior to major revisions to the Federal data.  Originally the Payroll was reported as growing at 2.27%  That was before the major revisions to the CES data was reported. The ADP Payroll was revised with the release of the February ADP report, in an apparent effort to more closely compare with the revisions made in the Employment Situation Report. The annual ADP growth rate was reduced to 1.87% for January. 

What has been projected for the Employment Situation Report?  Last week this column produced an article regarding the CES and CPS data. It projected that:

  • The data from 2003 through 2017 reveals a valley gorge in payroll growth. January Growth has been between 1.80% and 2.40% between 2012 and 2017
  • NSA CES Private Sector worker losses would be seasonally adjusted to SA CES Private Sector Worker Gains.
  • Month to Month  SA Worker gains in all sectors except Information Technology (IT,) and Government.
  • January to January SA Worker gains in all sectors except Mining and Logging (M/L.)
  • The annual CES Worker growth has been over 1.90% February through December, and December it exceeded 2.00%
  • The Seasonal factors used to convert the NSA CES Private Sector data to the SA CES data vary significantly during January. It was possible to see 196,000 to 236,000 SA CES private sector workers added, depending on the growth rate and seasonal factors, prior to the published revisions to the 2018 data.
  • There were 43,000 private sector workers added to the benchmark. This may reduce the January growth by 43,000 workers to between 153,000 and 193,000.
  • The government shutdown will not impact the "private sector job creation streak" data. That Economic Urban Legend is safe for now.
  • Wages were expected to grow month to month and January to January for almost all sectors, setting January hourly wage records.
  • The number of multiple job workers was projected to grow from January 2017 levels and drop from December 2018 levels.

Expect massive confusion when both reports are released.
Some people do not understand that the ADP data is Private Sector data includes government workers.  The "labor dispute" may not be recorded or reported in the data.

Expect more of the same for The ADP Private Sector Payroll data.   The annual growth rate for October was 2.00%. The annual growth rate for November was 1.96%. The December growth rate was 1.99%. It is bouncing higher one month, lower the next. Expect a rate of 1.96% to 1.99% and a seasonal adjusted payroll growth of 226,000 to 259,000 based on the annual growth.

Expect all sectors to grow January to January.  The largest growth,by percentage, to be in Construction, Natural Resources (M/L,) Manufacturing, Professional Business Services (PBS), and Education/Health Services (EHS.) This is important for the Employment Situation report as EHS and LAH are two of the largest sectors and two of the lowest paid sectors. IT could drop a very small amount.

Expect month to month gains in all payroll sectors.  The growth rate here bounces around even more than the rolling year growth rate.  Last January we grew at 0.19%. We grew at 0.20% January of 2017.  We grew at 0.17% this July, 0.13% during August, 0.17% during September, 0.19% during October, 0.12% during November and 0.21% during December. We grew 0.18% during both January 2013 and January 2014. Expect a value of between 0.17% and 0.20% or 217,000 to 259,000 payroll positions.

The largest growth will be in Construction, M/L, Manufacturing, PBS and EHS.
  Construction and M/L, and Manufacturing are some of the higher paying sectors. EHS is one of the largest and lowest paid sectors. f

Will the 2018 ADP Data be revised this month or next month?
The data is revised every month. The real question is whether or not the CES revisions of 43,000 more workers is pushed through to the ADP data this month or next month? If the 2018 data is revised up 4,000 this month then this will "borrow" 43,000 payroll positions from January 2019.  A number between 226,000 and 259,000 would be reduced to between 183,000 and 216,000 payroll positions.

The ADP Payroll Data is Playing five card stud and the CES data is playing darts. The ADP data is all-in not knowing what cards the CES data is holding. The CES data is throwing darts as to what seasonal factor to use. The trend is our friend. We are growing faster than we were last January, even after the revisions. We may have been growing faster than reported.Anticipate an annual rate just under 2,00% for the ADP annual growth rate. Do not be surprised if it is reported over 2.00% for a month until the ADP data is revised.  Expect people to be shocked by the good data because this is the private sector payroll data and they are used to the non-farm payroll data from the Government.

It's the economy.