Reclaiming Common Sense

The May ADP Private Sector Payroll Report was a Disappointment

Normally after an ADP trough there is an ADP Bounce-back

The May ADP Private Sector Payroll report, as well as the May Non-Farm Payroll Report was a disappointment. The month to month ADP payroll growth was one of the weakest since 2010. The Private Sector Employment Situation data was better than May 2016, and that isn't saying much. Both the Month to month ADP data and the June to June Data are projecting a rebound.

The Month to Month growth is anticipating growth in the range of 170,000 to 270,000 seasonally adjusted private sector workers joining the economy. Normally we grow between 0.07% (2012) and 0.17% (2018) month to month during the month of June. We did contract by 0.02% during 2003. We also contracted during the Great Recession. All sectors, except Information (IT,) are expected to growth this month. The largest percentage growth is anticipated in Natural Resources (NR,) Leisure and Hospitality (LAH,) Professional Business Services (PBS,) and Construction. A bounce to last year's 0.17% would ease many minds that May 2019 was a "one off" month.

The June to June data is projecting an even bigger month. The ADP growth rate was over 2.00% from July 2018 to April 2019. We grew at 1.96% during June 2016 and 2018. We grew at 2.00% during June of 2011 and 2013. We grew at 2.01% during June 2012 and 2.03% during June 2006. We recently grew at 2.10% during December 2018, and January and February of 2019. A growth rate of 1.92%, the same as last month, gets us 224,000 private sector workers added to the economy. If we rebound to 1.96% then we hit 275,000. If we manage another 2.00% month then we will see 325,000 private sector workers added to the economy. All sectors should add workers. The question is will we see comparable growth in Natural Resources as we saw last year?  The other sectors that should show the largest percentage growth are Construction, PBS, LAH, and Education and Health Services (EHS.) The PBS, LAH, and EHS sectors also have the largest levels of job openings, including also Trade, Transportation and Utilities (TTU,) per the JOLTS Job opening report for the month of April. We had a 300,000 month this January after the first revision to the data, not after the second revision. The annual growth is projecting 224,000 to possibly 426,000 jobs being created. Four Hundred Thousand. The overlap is between 224,000 and 270,000 jobs being created, or possibly 248,000 total jobs added. The month to month data is projecting the lower number so the lower number is very possible. It doesn't seem that the 170,000 value is going to happen. It should be much higher than 200,000.

Watch the revisions. If the May data is revised up from 27,000 jobs level that was recorded last month, and it should, then that "borrows" growth from June. If that data is revised up by another 27,000 workers then a 227,000 number would be reported at 200,000.

Last month the data disappointed. All sectors were expected to add jobs. That didn't happen. This month a bounce back is expected. We have a record level of Current Employment Survey (CES) Workers. The CES data is expected to growth non-seasonally adjusted through July before a minor, annual, drop and then a recovery and resurgence during the Christmas hiring season.  The CPS (Current Population Survey) data normally adds FT jobs through July and sometimes into August.  The CPS and CES data will be analyzed in the Employment Situation Forecast Article. Expect good news right before the July Fourth Holiday from the ADP data.

It's the Economy.