July 7, 2016

June 2016 ADP Employment Report: 172,000 Private-Sector Jobs Added (See Conference Call Notes; Zandi’s Describes 2% GDP Growth as ‘Rock Solid’)

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 8:05 am

Predictions: 152,000 to 157,000 private-sector jobs added.

Worth watching this time is whether there are previous downward adjustments, especially to May, given the difference between ADP’s previously reported 173K and the government’s 25K private-sector figure. About 36K of that difference is due to Verizon strikers being considered unemployed by the government but not ADP, but that still leaves a difference of well over 100K.

The home page for the report will be updated at 8:15.

HERE IT IS: “Private-sector employment increased by 172,000 from May to June, on a seasonally adjusted basis.”

From the press release:

“Since the start of 2016, average monthly job creation has slightly dropped,” said Ahu Yildirmaz, vice president and head of the ADP Research Institute. “Lackluster global growth, low commodity prices, and an unfavorable exchange rate continue to weigh on U.S. companies, especially larger companies.”
Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth revived last month from its spring slump. Job growth remains healthy except in the energy and trade-sensitive manufacturing sectors. Large multinationals are struggling a bit, and Brexit won’t help, but small- and mid-sized companies continue to add strongly to payrolls.”

- May, from 173K to 168K.
- April, from 168K to 149K, with April originally coming in at 156K.

Conference call notes:

Maximum Hillary Clinton 2015 contributor Mark Zandi:

Good news. Solid job gain. That does not include the effect of the Verizon strike (reversal of the 35K in the BLS report). BLS would supposedly give us another 35K on Friday, or about 205K in June’s government report.

Today’s report should minimize worries that job adds are throttling back, i.e., last several months were a temporary lull, if confirmed by Friday’s BLS number. Job creation is still above growth in labor force and fast approaching full employment, but still too heavy on part-timers. We’ll be to full employment by year-end.

There’s consistent acceleration in wage growth (??). Wage growth is now moving higher. 3%, up from the 2% during the rest of the recovery (3% is historically weak for a recovery — Ed.)

Energy sector job losses should stop happening towards end of year with more stable $50 oil prices. Continued weakness in manufacturing activity. Blames strong dollar and global economy. Mfg seems to have stabilized, even the trade-sensitive sectors. ISM manufacturing showed improvement, job losses should abate.

Weakness in construction during past few months, “perplexing,” but should improve in single-family home market. Construction market should remain healthy, but this spring was soft, but it should reverse, esp given record-low mortgage rates.

Company size data shows that big companies is where the softness is. They’re getting cautious in light of weak profitability and uncertainty and Brexit (of course — Brexit is the cause of all evil in the world — Ed.). But US Brexit impact shouldn’t be that meaningful. Financial markets are OK despite Brexit, and are close to record highs. BUT … LT interest rates have dropped, yields are at record lows. Lower US yields reflect US being in better situation than rest of world. Lower rates should be a significant plus for the economy.

Dollar has appreciated. On balance, Brexit factors affecting US may help because of flight to quality.

Big danger of Brexit is other referenda. It’s not obvious that Brexit will have that impact.

US economy is fine, and based on job market, it’s healthy. Recession pessimism feels misplaced.


ME (BLS vs. ADP numbers) — BLS will come back up, in his opinion. Response to BLS survey was relatively low, perhaps skewing to the pessimists. Labor market still feels good but slowing, but it should slow once you hit full employment anyway, and maybe some of that is happening.

ME (GDP comprehensive revision impact) — Hard to know, but in recent years (3-4 or longer) they have lowered GDP, so that would indicate a continuation. There’s nothing fundamental suggesting one way or another.

Chris Rugaber, AP (Verizon explanatiion) — BLS measures by who gets paid; ADP looks at who is on payroll. Strikers don’t affect ADP, they do affect BLS.

Rugaber (what jobs number tomorrow would cause Fed to think slowdown was temporary) — Less than 100K would indicate throttling back and argue for no rate increase this year or even next year. 150K would be gray area, OK, but not enough to convince Fed to move quickly. 200K might cause need to raise rates if it gets confirmed for a couple more months. Current Fed Board is very cautious right now with a very high bar to trigger rate increases. Recovery has been 2 percent “rock solid” for a long time. (!!) Economy has lots of resilience. Some worries about an overheating economy by next year.

UPDATE: Zero Hedge notes that the 21,000 seasonally adjusted manufacturing jobs lost is the worst monthly result since 2010.

That’s not good news, but I don’t think it’s the disaster some will surely cite.

Since the auto bailout, UAW-represented plants have tended not to shut down at all or to shut down for far briefer periods during late-June early July. I think they’re now back to a more typical historical pattern of two-week shutdowns, during which workers, as I understand it, typically file for brief unemployment benefits and aren’t paid by the companies. (I’d appreciate being told by someone closer to the situation whether I’m right or wrong about this.)

If I’m wrong about this, maybe it is a disaster.


1 Comment

  1. [...] keep on hearing that wages are rising. Mark Zandi trumpeted that claim once again yesterday’s ADP conference call. Too bad the numbers don’t support it. Hourly earnings, at $25.61, are up just 8 cents in the [...]

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