Reclaiming Common Sense

Strong Month to Month and July to July Growth Except for Information

The first week of the month is normally "Jobs Week" with the Wednesday release of the ADP Payroll report, the Thursday release of the Weekly Unemployment Claims Report, and the Friday release of the Government Employment Situation Report, or Jobs Report. The ADP report measures changes in private sector payroll. The unemployment report reports on those who received unemployment claims for the first time and those who continue to receive unemployment claims. The Jobs report measures the number of full-time jobs, the number of part-time jobs, the number of unemployed workers, and the number of workers. he number of unemployed workers (U-3) does not match the number of continuing claims because some people who report as being unemployed do not qualify for unemployment benefits. The ADP forecast article for this month, "July ADP Payroll Forecast: Up Times Ten" examined the month to month growth rate, the July to July Growth rate, the month to month changes in sector data and the July to July changes in the sector data. It was projected that:

  • Month top Month growth should have been reported in all sectors except Information Technology;
  • Month to month growth should have exceeded exceed the growth rate of June 2018) 0.14% and even better than July 2017 pace of 0.16%, yielding a possible growth of 200,000 to 250,000 payroll jobs added.
  • July to July Growth should have been reported in all sectors, even information technology, although IT should have the slowest growth.
  • The Annual Growth rate should have been greater than July 2017 and better than June 2018 with a potential range of 206,000 to 309,000 workers. It was expected that the value would fall around 250,000
  • It was also expected that here could be an upward revision of 25,000 to the June data, effectively reducing the bump from 250,000 down to 225,000.

What was reported in the July ADP Report?

We saw better month to month growth than June 2018 and Better than July 2017. We saw a large spike in Natural Resources, Construction, and Manufacturing. The month to month growth rate was better than July 2011, 2012, 2013, 2016, and 2017.It was virtually identical to the July 2015 growth rate and only slower than the 2014 growth rate for the most recent years. The thought was that it would grow between 0.14% and 0.17%. It hit 0.17%.

We saw better annual growth than last month or last July. Remember that this data is all seasonally adjusted and that the data was revised this February. The Annual growth rate was up most for Natural Resources, Construction, Professional Business Services, and Leisure and Hospitality.  The projected growth range was 1.84% to 1.92%. There was a question as to whether or not that the growth rate would be "allowed" to exceed 1.90%. A rate of 1.86% should have meant that we added 231,000 payroll jobs. We "only" added 219,000.

May and June had their data revised higher overall. The May total data was revised up by 7,000 and June was revised higher by 4,000. If these revisions are added to the July ADP number the net payroll change was 230,000. Goods producing jobs were revised down for May by 15,000 jobs and were revised down 16,000 for June. Service producing jobs were revised up 22,000 for May and revised up 27,000 for June. 

The month to month growth rate fell within expectations, leaning to the high side. Annual growth pretty much split the difference at 1.86%. The upward revisions were expected. The softness in Information Technology sector was expected. This portends well for the Friday Jobs Report. The ADP report does not cover Government Sector jobs. Depending on how the almost certain non-seasonally adjusted drop in Government jobs is seasonally adjusted, the non-farm-payroll (NFP) number could come in lower than the ADP Private sector payroll number, seasonally adjusted. Watch the total private sector data. Watch the level of full-time and part-time jobs record and reported in the Current Population Survey (CPS) or Household data tables.

It's the Economy.