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Wednesday, June 5, 2013

ADP Says 135,000 Private Jobs Added in May 2013

Is the sequester impacting job growth?  ADP shows lackluster private sector job growth in May.    

ADP job numbers for May 2013 show continued private-sector job growth, but lower growth than expected as private employers add 135,000 jobs.

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 that, while the private sector continued to add jobs for the 39th consecutive month, job growth was weaker than last month and weaker than anticipated.

ADP's numbers are based on their own payroll transactions, "
Bureau of Labor Statistics employment data, and the Philadelphia Federal Reserve Bank’s AruobaDiebold-Scotti Business Conditions Index. The sample size of the ADP data set (is derived from data) which accounts for more than 20 percent of all U.S. private sector employees."

BLS Jobs Numbers and Unemployment Rate To Be Released Friday, June 7th.

Bureau of Labor Statistics employment reports are not released until Friday, so we will have to wait until then (June 7th) to see if the BLS agrees.

Last month, ADP claimed 119,000 new private sector jobs (revised downwards to 113,000 new private sector jobs this month) but the BLS estimated that 176,000 private sector jobs were added.  ADP estimated that 641,000 private sector jobs were added in the first four months of 2013, while the BLS estimated that 813,000 private sector jobs were added in those same first four months.

ADP writes:
Private sector employment increased by 135,000 jobs from April to May ... on a seasonally-adjusted basis. April’s job gains were revised downward to 113,000 from 119,000.
  • Small businesses (1-49 employees) +58,000
  • Medium businesses (50-499 employees) +39,000
  • Large businesses (500 or more employees) +39,000
From MSNBC's Money, under a headline that says "Wall Street Opens Lower After ADP Data":
Stocks opened lower after data showing job growth remained sluggish did little to ease concerns the Federal Reserve may slow the pace of its economic stimulus program.

The ADP report also shows that most job growth occurred in the service-providing sector which added 138,000 out of the 135,000 jobs last month.  (The goods producing segment was estimated to have lost 3,000 jobs.)
Mark Zandi, chief economist of Moody’s Analytics, is quoted in the ADP report: 
The job market continues to expand, but growth has slowed since the beginning of the year. The slowdown is evident across all industries and all but the largest companies. Manufacturers are reducing payrolls. The softer job market this spring is largely due to significant fiscal drag from tax increases and government spending cuts.
When attempting to make any sense of this ADP report, here are a few things to consider:
  • This is an estimate based mostly 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 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've mentioned in previous months, 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 three 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, still shows an increase of 135,000 jobs, which is an improvement from last month, but the pundits expected more jobs so it is seen as a disappointment.
  • Headlines are often sensational and absurd.  

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