Data Indicates Month to Month Growth in all ADP Sectors
Data also indicates May to May Growth in all ADP Sectors.
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." The headline "jobs number is the Current Employment Statistics (CES) worker data. The real jobs data comes from the Current Population Survey (CPS) jobs and unemployment data. This month we are receiving the May Jobs Report. This should not be confused with the April JOLTS Job Opening and Labor Survey data that will be released after the May Jobs Report. What can we expect from the ADP Payroll data this month?
We are off to our best start since 2006. We saw a slow down in ADP payroll increases during 2006 during the Summer months. The thing to watch is how we do to prior May reporting periods. We saw 278,000 payroll positions added during May 2014, and 299,000 added during may 2011, and even 300,000 during May 2005. That said, we also have been in the 170s the past three years with 170,000 added during may 2016, another 173,000 added during May 2017, and 178,000 during May 2018. We are averaging 227,500 jobs a month this year. The Current year data is projecting 180,000 positions added as a minimum and possibly up into the 250,000 range if we "throw out" the March data.
The Month to Month Data is erratic. It could spike high or drop low. If you examine the rolling month data you can see that we could grow at 0.14% as we did during 2010, 2012, and 2017. We could grow month to month at 0.15% as we did during May of 2004 and 2006. We could grow at 0.17% or 0.18% as we did during May of 2014 and 2013, respectively. Then again we could grow at 0.21% like we did last month and like we did during 2016. There is the possibility that we could grow at 0.22%, or 0.23% or even 0.25%. The Month to month growth indicates a range between 180,000 and 320,000 seasonally adjusted private sector payroll positions added during May. When we have been around the 0.21% level we have been dropping to 0.17% the following month. A growth rate of 0.17% gives us 217,000 positions added.
Expect all sectors to grow month to month. The strongest percentage growth should be in Natural Resource (or Mining and Logging,) Professional Business Services (PBS) and Construction. There could be weakness in Financial Services (FIRE,) Trade, Transportation and Utilities (TTU,) Information (IT,) and Education and Health Services (EHS.) Do not be surprised if the seasonally adjusted data shows a contraction in any of these four sectors.
The Rolling Year, or trailing year, data indicates that we should grow over 2.04% and possibly at 2.18%. This rolling year data has been impacted by the annual revisions the past two year. We were growing at 2.27% during January 2018 before the February Revisions dropped it to 1.80%. We were growing at 1.94% with the release of the January 2019 ADP report before that was upward revised to 2.13% with the February 2019 report. We have been growing by at least 2.04% each month since July 2018. If we grow at "just" 2.04% we will add 180,000 payroll positions. If we grow at 2.15%, slightly better than last month's 2.12% we could hit 319,000 workers. We could hit 243,000 (2.09%) or 281,000 (2.12%) or 357,000 (2.18%)
The Rolling Year data indicates that all sectors should grow their payrolls, too. We should 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.
Watch the revisions. If the data from April is revised higher from the advance value by 30,000 positions then we would see this month's data reduced by 30,000 positions and the opposite is also true. If April is revised lower by 30,000 then that would boost May by 30,000.
Expect, as a minimum, that we will add 180,000 payroll positions. Do not be surprised if we see over 300,000 positions added in the private sector. If we add 300,000 it would be the best since February 2006. (The February revisions gave us a 300,000 value for January 2019 before the March revisions took them away. Is 217,000 possible? Yes. Is 227,000 possible, Yes. Is 243,000 to 281,000 possible? Yes. The month to month data is skewing the data to the low side. Expect a number around 219,000 to 232,000.
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.)
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