Data Indicated Month to Month Growth in all ADP Sectors - Big Miss
Best May to May Growth since 2016 - All Sectors Up
The ADP Payroll report is released the Wednesday before the government's Employment Situation Report, or jobs report. ADP is a private company and reports on the private sector payroll numbers. The Jobs Report headline number is the Non-Farm Payroll (NFP) number. The NFP includes both private sector and public sector "jobs." We are off to our best start since 2006. The current year data was projecting 180,000 positions added as a minimum and possibly up into the 250,000 range if we "throw out" the March data. All sectors were expected to grow month to month and May to May.
The Month to Month Data was projected to either drop or spike from last month's growth rate because it has been bouncing like a ping pong ball. This May was the worst May, without an actual contraction, since May 2004 when we had monthly growth of 0.05%. This month we only grew at 0.02%. The official Seasonally Adjusted Payroll number came in at just 27,000 positions added. This comes with a minor upward revision of 6,000 positions added to March and 2,000 positions added to April. The number was thought to be 207,000 or 227,000, or 270,000, not 27,000.
We saw month to month declines in Construction, Natural Resources, Mining and Logging, Manufacturing, Information, and "Other Services." It was expected that all sectors to grow month to month. It was thought that IT would be weak, not contract. It was thought that the largest growth rates would be in Natural Resources and Construction.
The drop in hiring could be a "one off." The Government Non-Farm Payroll number was originally reported at 23,000 workers, then 33,000, before the "final" value of 56,000 was reported. The official ADP data for February is 220,000 private sector workers. Does this mean that a 229,000 is possible to "offset" the 27,000 ADP number? We will see this Friday.
The Rolling Year, or trailing year, data indicates that expecting a spike or a drop should grow over 2.04% and possibly at 2.18%.. The remarkably weak month to month growth pulled down the annual growth rate to 1.92%. It should be noted that this is higher than May of 2018 when it was 1.89% and higher than May 2017 when it was 1.83%. It is also comparable to May 2016 when it was 1.94%, according to the February revisions.
The Rolling Year data indicated that all sectors should grow their payrolls, and they did. It was thought that we would see growth in Natural Resources, Construction, and PBS, as well as Leisure and Hospitality (LAH,) and Education and Health Services (EHS.) Growth in PBS, TTU, and EHS and LAH are expected because these are the four sectors that had the most job openings, quits, separations and hires during the month of March. The weakest sectors for this month are expected to be TTU and IT. The strongest growth rates were in Construction, PBS, LAH, EHS, and Mining and Logging.
The Current Year data "came of track" this month. The current year data, seasonally adjusted, was trending better than 205, 2016, 2017, and n" during 2018. Now we are tracking around 2015 and 2016 through May. We saw a similar "right turn" during 2005 during September of that year. We saw a "right turn" during November of 2006
The ADP number does not include government workers. seasonally adjusted data from the CES data base could inflate or deflate the headline jobs data. Different data sets. Different sample sizes. Different growth rates. The Employment Situation report forecast article will address these differences. The most important thing to remember is that it is difficult, if not impossible, to be headed into a recession as the number of workers is growing. When the current year data is greater than the trailing year data then we are in an expansion mode and should expect data leaning to the higher end of the low range of data. This means 245,000 is a reasonable expectation depending upon the revisions to the prior data. Remember, we added 275,000 positions last month. (ADP data can be found here.)
This may have been a "one off." It may be the start of something. It may be a pause. It may be a quirk of the seasonally adjusted data that is offsetting the difference between the February ADP report and the February "Jobs Report." We will know more on Friday.
It's the Economy.
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