Reclaiming Common Sense

The ADP Payroll report is released the Wednesday prior to the jobs report from the federal government. This column produces an ADP forecast article ahead of the ADP release data, as well as it produces a Jobs Report forecast article prior to the release of the monthly jobs report. The ADP data closely mirrors the Current Employment Statistics Private Sector data. The "headline" jobs number on Friday is the Non-Farm Payroll (NFP) data. The NFP data includes Government Sector workers, ADP and the Private Sector data do not include government sector workers. The ADP data also measures payroll jobs, not workers. The Current Population Survey (CPS) measure full-time and part-time jobs. These three surveys have similar, yet different, data that they are collecting and different sample sizes. The CPS and CES data offer seasonally adjusted (SA) and non-seasonally adjusted (NSA) data. The ADP data is only available seasonally adjusted.

The forecast for the payroll growth was done using three methods: Annual rate of growth, September to October monthly rate of growth, and the current year growth rate. The findings were:

  • All sectors were expected to add to their payroll except possibly Information Technology. The largest growth should have been in Construction, Manufacturing, Professional Business Services, and Education/Health Services. It was anticipated that we would see at least 1.97% annual growth and possibly 2.02% to 2.08% growth. The conservative number was 215,000 to 235,000 jobs added, with the outside chance of 300,000 jobs added.
  • The month to month data pointed to gains in seven of ten sectors with possible growth in construction due to the hurricane, possible growth in Trade, Transportation, and utilities, and a slight chance of growth in Information Technology.The largest growth should be in Leisure and Hospitality, Professional Business Services, and the Natural Resource Sectors. It was thought that we should see 0.16% to 0.20% growth from month to month, yielding 200,000 to 250,000 jobs added, and if we just grew at the same rate we did last month then we could add 230,000 jobs.
  • We have added 1.834 million workers to the payroll number during the first nine months. This means that we have added just over 200,000 jobs per month, so the 200,000 number should be the floor for expectations.
  • Watch the Revisions. If we see a number around 200,000 with upward revisions to the August or September data of 40,000 jobs then the 200,000 number this month is really 240,000 more than last reported. Similarly, if the data from August and September are revised down by 40,000 then a number reported at 240,000 really should have been reported at 200,000,

Month to month we saw the addition of 227,000 jobs with growth in ALL sectors. The October ADP report also revised the August data to 162.000 private sector jobs added, and the September data to 218,000 jobs added. The largest growth was seen, in real numbers, in the LAH, PBS, EHS, Manufacturing and Construction Sectors. We even saw improvement in IT, Natural Resources, Financials, and "Other Services."  The largest percentage growth was seen in the Natural Resources sector, LAH, Construction, Other Services, and TTU.

Annually we saw growth in ALL Sectors. The annual growth rate hit 2.00% for the first time since the February Data revisions. This means that it was the first time since May 2016 that we were at, or over, 2.00% The largest growth October to October was in the Nat. Res, sector, Construction sector , LAH, PBS, EHS, and Manufacturing sectors.

The revisions to the prior data means that This month we "only" saw 215,000 jobs added. The August data was originally 163,000 jobs added, then 168,000 jobs added, and now back to 162,000 jobs added. September was originally reported at 230,000 and was revised down to 218,000. This boosted the data for October by 12,000.

Year to date we are up 2.018 Million seasonally adjusted  jobs. This places us on track with 2015, the best year under the former Obama Administration. Remember that the ADP Payroll data was significantly revised between the January and February reports. The 2015 Data for December was revised up by 102,000 jobs. The data for 2017 was virtually unchanged with Payroll remaining at 123.007 Million workers, with a difference of 582 workers. The data for 2017 was revised down by 228,000. The upward revisions to 2015 made the second to last year of the Obama Administration look better than it was originally reported. The downward revisions of the 2017 made the first year of the Trump administration look weaker than it was originally reported. The changes changed the trajectory of 2017 from an improving economy to a slowing economy. This was detailed in "February ADP Up, Significant Revisions." The difference was a growth rate of 1.74% versus 2.27% for January of 2018. We saw 2.073 million seasonally adjusted jobs added through October of 2015. The same month data was 1.956 million for October 2013, 1.775 million for October 2017, and 1.722 million for 2016.

This data was very good to excellent. It would have been great if the data for August and September had been revised higher than originally reported. We are on track for the most seasonally adjusted jobs added since 2015, and we might hit 2014 levels. This is all seasonally adjusted private sector data. It is anticipated that we will add seasonally adjusted government jobs this month, so the headline Non-farm payroll data may exceed 227,000 and head toward 250,000 or higher. The growth in Natural Resources, Construction, Professional Business Services, and Manufacturing means that the average wage rate may be puled higher than expected this month.

It's the economy.