March 5, 2014

February ADP Employment Report and Conference Call (030514): 139K Private-Sector Jobs Added; Previous Four Months Revised Down

Filed under: Economy,Taxes & Government — Tom @ 7:12 am

Prediction: Bloomberg’s estimate is 155,000 private-sector jobs added.

February’s number will appear here at 8:15 a.m.

I’ll be live-blogging the ADP conference call at 8:45 a.m.

HERE IT IS (direct link).

Topside announcement:

Private-sector employment increased by 139,000 from January to February, on a seasonally adjusted basis.

- Small businesses (1-49 employees) +59,000
- Medium businesses (50-499 employees) +35,000
- Large businesses (500 or more employees) +44,000

Whoa — this was a big month for prior-month knockdowns:
- January went from 175K to 127K.
- December went from 227K to 191K.
- November went from 289K to 245K.
- October went from 206K to 196K.

That’s a combined reduction of 138,000 jobs from the four previous months.

Going back further, the four previous months (June through September 2013) were revised up by a combined 122K (Note: Changed from 12 K earlier this morning; apologies for the error). February through May revisions totaled +48K.

From press release:

Mark Zandi, chief economist of Moody’s Analytics, said, “February was another soft month for the job market. Employment was weak across a number of industries. Bad winter weather, especially in mid-month, weighed on payrolls. Job growth is expected to improve with warmer temperatures.”


Number “was on the soft side,” third month in a row of weak job growth. Pretty broad-based, even some of the usual gainers were at relatively slow pace.

“Somewhat disappointing report.”

Reasons for slowdown in private employment growth:
1) bad weather, esp during survey week in mid-Feb.; affecting all economic data. ADP counts are based on people on payroll vs. BLS which will not include people not currently being paid. (So he expects BLS is likely come in low relative to the ADP estimate, as was the case last month).
2) expiration of unemp. benefits and the Nov. food stamp reductions which will clips a couple tenths of a point off of GDP growth for a couple of quarters.
3) less inventory accumulation, particularly affecting manufacturing.

Considers all of these factors temporary, and thus we’ll see faster growth in future quarters past 1Q. Economy is much stronger than data suggests. 1Q14 is tracking at about 2% annualized. Underlying is closer to 3%.

Underlying job growth trend is 200K, and expects snapback from weather effects, starting in April or so.

He believes his view is the consensus view and that markets’ continued rise reflect that.

Company size comment: Job creation is more balanced and broad-based across company size. Small businesses had previously been lagging, but aren’t any more. Likely traceable to the housing recovery gaining traction. Anticipates housing will continue to improve this year.

- Rugaber from AP — about previous month reductions — goal is to try to get to BLS employment estimate. If BLS is weaker, it gets reflected in ADP numbers.
- Blumer, re 4Q13 GDP next est. and Obamacare impact on GDP — Zandi expect slight rise to maybe 2.5%. Q1 looks like 2%. Obamacare — spending on healthcare went up $55 billion (a “positive”). But also work disincentives.
- Annalyn Kurtz from CNN, re weather — she thinks BLS says people would have to be out of work for the whole pay period for them not to be counted. With people paid every two weeks, does that happen a lot? (GREAT question) Zandi’s response is also good, saying that hiring stops in really bad weather and start dates get deferred, people aren’t immediately replaced. Also indirect impacts on service providers when power is out, etc. Hours worked reductions statistic might go down in Feb., that a “tell.”
- Kurtz again, re const. jobs (+48K in Jan., seasonally adjusted). Jan. survey week was the warmest in the month. Wouldn’t be surprised if const. goes negative or small gain in Feb.
- Kathleen M from WSJ, asking for BLS estimate for Feb. Zandi says 130K is his best estimate. Risks of that number being off are on the downside.



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