Reclaiming Common Sense

  Private Sector Payroll - Playing Poker with the Friday Jobs Report

The ADP Private Sector Payroll data is thrown on the table before the Monthly Employment Situation report from the Government is released. There is head scratching when the two are not close. This month we know that the 2018 data from the government is being revised. We might see ADP follow suit next month.Some "experts" were anticipating only 173,000 payroll positions added in the ADP report. It was better than that. The Article "Jan. ADP Forecast: Expect Growth Except IT" was expecting much better than that.  What was reported?

The ADP Private Sector Annual Growth Rate came in substantially higher than January 2018.   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. It was projected that we could see 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. The 1.94% rate meant that 213,000 private sector payroll positions were added to the economy during January.

All Sectors Grew January to January.   The largest growth, by percentage, was expected 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. The largest growth January to January were Mining and logging (Natural Resources) up 6.27%, Construction at 3.01%, PBS at 2.72% and LAH at 1.94%.

It was expected that we would see  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. It was expected that we would grow between  0.17% and 0.20% or 217,000 to 259,000 payroll positions.  We grew at 0.17%.

The largest growth were expected to be in Construction, M/L, Manufacturing, PBS and EHS.  The four  sectors with the largest growth rates were Construction at 0.49%, Manufacturing at 0.26%, PBS at 0.22% and LAH at 0.19%. EHS was in fifth at 0.16%. The jump in Construction, Manufacturing, and Professional Business services means that the average weekly wage rate will improve. The improvement in LAH and EHS means that some of that improvement will be muted.

Will the 2018 ADP Data be revised 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. There were some revisions to the prior data. Total Private Sector payroll from 157,000 to 148,000 for  November and from 271,000 to 263,000  for December.

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. With an annual rate just under 2,00% for the ADP annual growth rate we are growing faster than last January. This report gives us some insight as to what to expect from the seasonally adjusted private sector data that will be released this Friday.

It's the economy.