Economic Forecasts

November ADP Payroll Should Grow by over 200,000

There are a number of reports that are released during any given month regarding employment or unemployment in the United States. The headline report is the Employment Situation Report, or Jobs Report. There is the Regional and State Employment and Unemployment (RSEU) report.There is the Local Area Unemployment Statistics (LAUS) data. There is the Weekly Unemployment Claims data. There is the Job Openings and Labor Turnover Survey (JOLTS) report. There is the ADP Payroll Report. The ADP payroll report is released the Wednesday Prior to the Friday release of the Jobs Report. (The funeral of former President George H.W. Bush is delaying the report by one day.)  The ADP data is closer to the Private Sector Current Employment Statistics data than it is to the headline Non-Farm Payroll Data because the ADP data excludes the Government payroll data while the NFP CES data includes the government worker data. The Jobs Report also includes the Current Population Survey (CPS) data on jobs and unemployment. Jobs are different from workers which is different from Payroll. The CPS data delineates between full-time and part-time jobs, the ADP payroll data does not. The CPS, CES, RSEU, LAUS, JOLTS, and unemployment claims data are available in non-seasonally adjusted and seasonally adjusted data sets. The JOLTS data is only available in the seasonally adjusted format.

What to Expect. This column produce an article this past Friday titled “November Jobs Report Forecast: More Growth” in which the CES and CPS data were examined. The data was examined from a month to month, October to October, Current Year, and Rolling Year perspective. It was thought that we could expect:

  • An annual growth rate (Rolling Year)(October to October) over 1.97% or between 250,000 and 320,000 private sector workers added.
  • A month to month between 225,000 and 265,000 private sector workers added
  • The Current Year data is trending with 2005 and 2015. This metric is projecting 235,000 seasonally adjusted private sector workers added.
  • We need to pay attention to the seasonal factors used because it could make the difference of plus or minus 50,000 workers.
  • We need to pay attention to the revisions to the September and October data.September was a weak month. Last month, rather quietly, 160,000 SA Workers were added to the August data. Not 6,000. Not 16,000. There were 160,000 SA CES private sectors workers added to the Advance August Data.
  • Expect to see month to month growth in all sectors, NSA, except Leisure and Hospitality (LAH) and “other Services (OS.)” Expect to see NSA growth in all sectors except Information Technology (IT.)
  • Expect to see SA growth in all sectors except month to month and November to November except IT. This is important for the ADP data.
  • Remember that the CES data was revised between the December and January reports, shifting 452,000 SA CES workers into 2016 and 2017 from 2018.
  • Remember that the February ADP payroll report did a similar thing.

All of this data gives us some framework as to what to expect from the ADP data.

Expect and annual growth rate over 2.00%. We had been growing, according to ADP, at a pace over 2.00% prior to their revisions. There is the possibility that the rate could come in at 1.97%, in which case the SA ADP number would be 169,000. This is unlikely. It is more likely to come in between 2.01% and 2.06% as we are in a rising economy and companies need workers for the Christmas Season. This means that we could expect a SA ADP between 219,000 and 282,000.

Expect month to month growth between 0.15% and 0.20%. The preponderance of data indicates a growth rate between 0.16% and 0.18%. We saw 0.16% growth during November of  2012, We saw  2013, and 2015.  We saw 0.17% growth during November 2011. and 0.18% growth during 2014. This means that we should see growth between 204,000 and 230,000. If we grow at 0.20% then we could go as high as 255,000.

The Current Year data indicates a minimum of 204,000. So far, we have added 2.043 million ADP payroll workers this year. We are trending with 2015, even after revisions, when we added over 2.5 million payroll positions. Could we average between 200,000 and 250,000 jobs this year for the final two months?

Expect Seasonally Adjusted Growth in all Sectors, month to month, and November to November, except IT. The largest month to month growth should be in Natural Resources, Construction, Education/Health Services (EHS), Manufacturing, and Trade,Transportation and Utilities (TTU.)  November to November it is expected that we will see our largest growth gains in Natural Resources, Professional Business Services (PBS,) Leisure and Hospitality (LAH,) and EHS. Remember that we had the most job openings in LAH, EHS, PBS, and TTU during the most recent JOLTS reports, plural, and the lowest paying CES sectors are LAH, Other services, TTU, and EHS.

Expect some revisions to the August, September, and October data. ADP only reported 162,000 payroll positions added during August and the SA CES revisions for August was 161,000. Some of those revisions had to be in the private sector. Remember if the data from October is revised up by 25,000 then that “borrows” 25,000 from November. A potential 250,000 AD payroll number is reduced to 225,000.

We are having one of our best jobs years in recent memory. The monthly revisions have been higher from their advance values, and their preliminary values. There have been major revisions to the ADP and CES data earlier this year, otherwise both data sets would be reporting larger gains this year. The CES data, ADP data, and JOLTS data have a familial resemblance. They are not measuring the same things. They are not using the same seasonal factors. You cannot expect them to have the same growth rates or the same overall data.  Either way we look at the data, there should be expansion. Expect a number around 230,000, assuming that there are not major revisions, over 50,000 payroll positions, to the prior data.

It’s the economy.

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