Economic Forecasts

Remarkable November ADP Payroll Report

The Monthly ADP payroll report is always released the Wednesday prior to Jobs Report Friday. The Payroll number and the Employment situation report number are “always” different because the Payroll report measures private sector jobs while the headline Current Employment Statistics (CES) data is the seasonally adjusted (SA) non-farm payroll (NFP) worker data. The rest of the Employment Situation, or “Jobs Report” is comprised of data from the Current Population Survey (CPS) data. The CPS data measures the level of the workforce population, the number of full-time and part-time jobs, and the number of unemployed workers.”The ADP report does not delineate the difference between full-time and part-time jobs. All of this data will be conflated with the JOLTS Jobs Openings and Labor Turnover Data for Job Openings. There is no distinction in the JOLTS report between full-time and part-time jobs. These data sets have different sample sizes, different error rates, and measure different things. This leads to confusion in the majority of the media.

This column produced a November Jobs report forecast article titled “November Jobs Report Forecast: More Growth.” The article produced details on what was expected for full-time (FT) and part-time (PT) jobs, unemployed workers, multiple job workers, and and  CES private sector workers, as well as what to expect in the government worker data. This column also published an November ADP Payroll Forecast Article. 

The ADP and CES data indicated that we should have seen November to November declines in the Information Technology (IT) sector. The CES data indicated that we would also see month  to month sector declines, NSA, for the  “Leisure and Hospitality (LAH) and for the “Other Services” sector. Seasonally adjusted data indicates that all sectors except IT will grow month to month and November to November. It is important to remember that the ADP payroll data underwent major revisions with the release of the February ADP report and that the CES data underwent a major revision after the release of the December Jobs report and prior to the January Jobs Report. Both revisions changed the rolling year growth trends for their respective data sets. It was see  projected that we should see at least 204,000 payroll positions, based on current year growth.

The month to month data indicated that we could see monthly growth of 0.16% to 0.18% or between 204,000 and 230,000 payroll positions added. If we hit 0.20%, which was a possibility, then the number should have hit 255,000. The rolling year growth was expected to exceed 2.00%. If we saw 2.01% to 2.06% annual growth then we could see 219,000 to 282,000 payroll positions added. The overlap was between 219,000 and 230,000. The major question was how much would the prior ADP data be revised. If the August data was revised higher by 160,000 workers, as the August SA CES data was revised, that would change to following months, plural, data, plural. If the net change to the October data was an upward revision of 50,000 positions then the November data would be reduced by 50,000 workers. A November value of 219,000 would be reduced to 169,000. The previously published data was 211,000 (July,) 162,000 (August,) 218,000 (September,) and 227,000 (October.) Remember that the upward revision for the SA CES data for August was for160,000. What was reported in the November ADP Report?

The November ADP report included revisions to the prior data.  from September and October. The data was revised down for September from 218,000 to 209,000 private sector payroll positions, seasonally adjusted. The October data was revised slightly lower from 227,000 to 225,000. This means that the revisions from September were almost entirely offset by upward revisions to the October data. These revisions did not meet expectations.

We saw Month to month growth of a meager 0.13%. This month to month growth was far less than the expect 0.16% to 0.18%. A drop in the month to month rate was a possibility. The good news is that this rate is better than it was during the month of November during 2004, 2006, 2007, 2008, 2009, and 2010. We were contracting during 2008, 2009, and 2010.

Sector growth was experienced month to month in all sectors except Information Technology, as expected.  The largest month to month growth was in the Professional Business Services Sector (PBS,) followed by Natural Resources, Education Health Services (EHS,) Leisure and Hospitality (LAH,) and Construction. Tomorrow’s Employment Situation Report will be interesting. Will the hirings align with these data points? What will wages do? Three of the four lowest paid wage sectors are LAH, EHS, and Trade, Transportation and Utilities (TTU.)

We saw annual growth ease to 1.97% – Still higher than 2016 and 2017. We saw November to November Growth in all sectors.  The largest growth was in PBS, Natural Resources, EHS, LAH, and Construction. There are individual variations in the annual growth rate. The general trend  is still higher than last year.

The Current Year Data is still strong – adding 2.211 million to the payrolls through November. We had only added 1.976 million last November, and 1.940 million as of November 2016. We are within 41,000 jobs of where we were during November 2015 when it was 2.252 million payroll positions that were added.

What does this mean with Regard to the November Employment Situation Report? Not much. The headline “Jobs Number” is the SA Non-farm Payroll (NFP) Worker data. This data is closer to the SA Private Sector data. This cannot be compared to the JOLTS data that we will receive next week, in part, because they are from different months and, in part, because they are different surveys with different sample sizes and error rates.

The data was okay.  The month to month data was weaker than expected, and still we added to payrolls in all sectors except IT, as was expected. We saw November to November Growth in all sectors. This is an expansion report, not a contraction report. This report is better than where we were during 2016 and 2017, according to the revisions to the data. We are trending just behind 2015, according to the data. That was a good jobs year.

It’s the economy.

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