Economic Forecasts

March ADP Payroll Forecast: All Sectors Growing

March ADP Payroll Report Should Surprise to the Upside with Increases in Payroll month to month and March to March for all Sectors

The recent ADP Payroll reports have given us some surprises.  The January ADP Payroll report surprised to the upside with 213,000 payroll positions being added to the economy. The  February ADP Payroll Report brought use revisions to the ADP data back to 2002 and brought President Trump his first 300,000 Payroll month (Page 2, Chart 1.) The payroll growth reported in the January 2019 report was shifted back to 2018, boosting the January value from 213,000 to 300,000 and borrowing growth of 87,000 payroll positions from February. These revisions reached back to 2002. What can we expect from the March ADP Report?

The ADP Private Sector Payroll report shows that the payroll data has been growing at more than a 2.00% rate and that it is growing faster than it was during March 2017 and March 2018.

The ADP Payroll data was reporting better than 2.00% growth during January 2018, until the February 2018 Payroll Report. This column produced an article during January 2018 with a projected strong February growth based on this growth rate. The systematic  revisions shifted growth from 2018 back to 2016 and 2017. January 2018 was originally growing at 2.27%. The 2018 revisions meant that we grew only at 1.80% during January 2018. This is important because even after the February 2019 revisions we have been growing in excess of 2.05% since September.

The Annual Growth rate is Currently 2.10%. The overall trend is to go higher from this point. We achieved 2.13% during March of 2016. If we hit 2.13% this March then we should see growth of 257,000 payroll positions. If we drop back a bit, as can happen during March, and we slow to a 2.05% growth rate then we would see 207,000 payroll positions added. The annual growth rate could hit 2.15% and we could see a headline number of 282,000 reported.

All sectors should report payroll growth, based on the annual growth data. The largest percentage growth should be in the Natural Resources (NR,) Manufacturing (MRG,) Professional Business Services (PBS,) and Leisure and Hospitality (LAH.) The main question is how much will the Information (IT) sector grow?

The month to month growth rate shows volatility. The February to March growth rate has been consistent at 0.17% during March 2016, March 2017, and March 2018.

The month to month growth rate has been consistent during the Month of March at roughly 0.17%. We have seen 0.17% growth rate during March 2004m March 2016, March 2017, and March 2018. We could see this growth drop to 0.15% or 0.16% because the trend is for March to grow a little slower month to month than February. 

It’s the Economy. If we grow at just 0.15% month to month then we will only add 189,000 payroll positions. If we grow at 0.17% that number is boosted to 216,000 payroll positions. If we hit 0.20%, as we did during March 2011 this number is bolstered to 252,000.

All sectors are expected to grow month to month, including Information Technology. The most growth, again by percentage growth, is expected in Natural Resources, Construction, PBS, Education and Health Services (EHS,) and LAH.

Expect the prior data to be revised, as normally happens every month.  The data is pointing towards a range of growth from 207,000 to 252,000 payroll positions. This means that we could realistically see 229,000 payroll position added prior to revisions. If the prior data is revised up 20,000 positions then that would “borrow” 20,000 from March, reducing the headline value to 209,000.

The ADP payroll report is released the Wednesday prior to the monthly Employment Situation Report. The ADP data is a private sector payroll report. The jobs report headline is the non-farm payroll (NFP) worker data. The NFP data includes government workers while the ADP data does not include government workers. Both numbers are seasonally adjusted numbers. Comparing the two data sets is like comparing a National League baseball team with an American League baseball team. AL pitchers do not bat, while  NL pitchers do bat. Batter Up!

It’s the Economy.

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