Reclaiming Common Sense

Jobs are Surging. Will ADP Payroll Report the Same Thing?

This week is "Jobs Week." Wednesday we will receive the ADP Payroll report for July. This report measures payroll jobs and only reports private sector data that has been seasonally adjusted. Friday we will receive the June Jobs Report, or Employment Situation Report, from the government. This report is created using two data sets, the Current Population Survey (CPS) data and the Current Employment Statistics (CES) data. The CPS data measures full-time jobs, part-time jobs, unemployed workers, and the workforce population. The CES data measures workers, private sector workers, non-farm payroll workers, wages for the private sector, and other data. The three data sets have different sample sizes and measure different things. The CPS and CES data sets have seasonally adjusted (SA) and non-seasonally adjusted (NSA) components while the ADP data only reports seasonally adjusted data. The CES data underwent major revisions between the December and January Jobs Reports. The ADP data underwent major revisions between the January and February Payroll Reports.  The best that we can hope for is to find trends in the month to month data and the same month annual growth by sector and in total.

The Month to Month ADP Data indicates that all sectors could show June to July Growth, except Information Technology.  The largest month to month growth should be reported in Construction, Professional Business Services, and Leisure and Hospitality. It is also expected to see considerable growth in Natural Resources, Manufacturing, Education and Health Services, and Trade, Transportation and Utilities. IT is up eight times since 2003 and down seven times. It is a coin flip.

The total monthly growth should be better than June 2018 and better than July 2011, 2016, and 2017. We were seeing an upward trend in annual growth through 2017 and 2018 prior to the revisions. This would also be reflected in the month to month variations, just not as smooth. If we grow at the rate we did during June we would only see about 175,000 payroll jobs added.  If we grow at the rate we did during 2011, 2016, and 2017 then we could add 206,000 payroll jobs. If we grow at the rate we did during July 2014 we could see 255,000 jobs added this July. The month to month growth is projecting 200,000 to 250,000 payroll jobs to have been added.

The July to July Growth shows that all sectors will report adding payroll jobs during July. The largest percentage growth changes will be in Natural Resources, Construction, Education/Health Services, Professional Business Services, and Leisure/Hospitality. The smallest growth will be in Information Technology.

The Annual Growth rate is projecting higher growth than the month to month growth rate. If we grow at the annual rate recorded last month we could see 206,000 payroll jobs added this July. If we grow at the rate we did during July of 2016 that number bumps up to 309,000. The 2017, revised rate, drops that to 126,000 while the July 2011 rate boosts it to 450,000 payroll jobs added in the private sector. 

The data points to at least 200,000 to 250,000 payroll jobs being added this July. All sectors should grow their payroll year to year, and all but information technology should add jobs month to month. The annual projection points to an even higher value, approaching 300,000. Expect a number at or above 249,000. WE don't know the seasonal factors used to convert the NSA data to the SA data. Also remember that if the June data is revised higher by 25,0000 jobs then the bounce this month will be 25,000 jobs lower than it would have been reported without revisions. If we would have reported 275,000 then the number would be 250,000. The same is true in revers. If we saw last month's data revised lower by 25,000 then this month would receive a boost of 25,000. 

Watch the month to month and July to July growth rates. Watch the revisions to the data.

It's the economy.