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Thursday, July 5, 2012

ADP Report June 2012: 176,000 Private Jobs Added

ADP Numbers for June 2012:  Bigger Increase than Last Two Months.  Does this portend good numbers when the BLS releases its monthly report tomorrow?



The monthly jobs report from the payroll processor ADP is usually seen as a bellweather of the national jobs report from the Bureau of Labor Statistics that  is released a couple of days later.  This morning's ADP report seems to indicate stronger private-sector job growth than last month, and stronger job growth than expected:  
Employment in the U.S. nonfarm private business sector increased by 176,000 from May to June, on a seasonally adjusted basis. The estimated gain from April to May was revised up slightly, from the initial estimate of 133,000 to a revised estimate of 136,000. 
Employment in the private, service-providing sector rose 160,000 in June, after rising a revised 137,000 in May. Employment in the private, goods-producing sector added 16,000 jobs in June.
Manufacturing employment added 4,000, reversing May’s decline. 

When attempting to make any sense of this ADP report, here are a few things to consider:
  • This is an estimate based on ADP's survey of its payroll processing private-sector clients.  Over time, it moves in parallel with the government's BLS Establishment numbers, but it is not perfectly in synch with the government's numbers.  Also, the government reports may be more accurate in tallying small startups which may not be using a payroll processing service.  The ADP total numbers usually run about 300,000 to 600,000 lower than the BLS private jobs numbers in total jobs, not in increases or decreases of jobs.
  • To reiterate what I mentioned last month, one of the things that seems to be more prevalent recently is that the stock market moves up or down not in concert with any reports of job growth (we haven't had any decline in total private jobs in two years.), but in concert with reports of job growth compared to what the pundits THINK the reports should say.  This ADP report, if supported by BLS data, shows more job growth than the pundits expected, so stock futures turned positive after it was released.  
  • Headlines are usually sensational and often absurd. 
Small and medium service-providing companies add largest number of jobs.

The ADP report also shows that small (1-49 employees) and medium sized companies (50-499 employees) in the service-providing sector (vs. the manufacturing "goods-providing" sector) added the most jobs last month.  These segments were responsible for 149,000 of the added jobs.


Small and medium goods-producing firms have continued to grow throughout 2012, but large goods-producing firms (with more than 500 employees) have been stagnant.  Small and medium goods-producing firms have added an estimated 16,000 jobs last month, and 98,000 jobs total in 2012.  Large goods-producing firms stayed even this month and lost 4,000 jobs so far in 2012.


This report shows a turnaround in jobs in both Construction and in Manufacturing.  Construction rose by 8,000 jobs "more than reversing the declines of the two previous months."


Financial services added 11,000 jobs last month.  This sector has now added jobs for 11 consecutive months.

ADP also comments:
The acceleration of employment since April does lend credence to the argument that unseasonably warm weather boosted employment during the winter months, with a “payback” spread over April and May.

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