November 1, 2017

October 2017 ADP Employment Report: +235,000 Private-Sector Jobs (Plus Conference Call Notes); BLS Trails ADP Year-to-Date by About 500,000 Jobs

Filed under: Economy,Taxes & Government — Tom @ 9:13 am

Predictions: Zero Hedge says that expectations were for +200K.

From ADP: beating expectations, but with a reduction of last month —

Private-sector employment increased by 235,000 from September to October, on a seasonally adjusted basis.

From the press release:

“The job market remains healthy and hiring bounced back with one of the best performances we’ve seen all year,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Although the service providing sector was hard hit last month due to the weather, we saw significant growth in professional services, especially in the higher paid professional technical jobs. Additionally, small businesses rebounded well from the impact of Hurricanes Harvey and Irma, posting very strong gains.”

Mark Zandi, chief economist of Moody’s Analytics, said, “The job market rebounded strongly from the hit it took from Hurricanes Harvey and Irma. Resurgence in construction jobs shows the rebuilding is already in full swing. Looking through the hurricane-created volatility, job growth is robust.”

Prior Months:
- September is now 110K, down from the original 135K.
- August is now 228K, down from its original 237K and the same value as September.

So October’s beat of 35K was offset by prior-month downward revisions of 34K.

CONFERENCE CALL NOTES:

MARK ZANDI: ADP measures people on company payrolls. BLS measures people on company payrolls AND who is getting paid during the survey week.

Thus, there are bigger swings in BLS vs. ADP because of this during major storm hits.

So ADP’s 235K increase should foretell a 300K BLS number because of this conceptual difference.

Job market is still very healthy — +170K average in past two months, and unemployment rate should decline, and a sub-4% unemployment rate seems achievable by the end of 2018. Last time was tech bubble, this isn’t. This is a fundamentally strong economy.

Part-time people wanting full-time and not finding it is getting lower. Tight market, getting tighter.

Job growth will continue to slow because the supply of labor is getting tighter. (Seems like we’ve been hearing that for a while, and it hasn’t happened yet. — Ed.)

Wage growth is nw 2.5-3.0 percent, up from 3-4 years ago (1.5-2.0 percent). Real wage growth should significantly strengthen by mid-next year. (Translation: Wage growth is finally consistently beating inflation. — Ed.)

QUESTIONS:

ME: Why is BLS still badly trailing ADP in year-to-day job growth? A: Wait til Friday to see where things stand, but also BLS’s comprehensive revision, which goes through March 2017, shows job growth revised up. BLS is top-heavy on company size. ADP more representative, so ADP is better at catching small-business when it happens. BLS tends to catch up later.

ME, re 3Q17 GDP revisions. A: Q3 will get revised down, because construction spending has lagged and will hit GDP by maybe by 0.5 points.

Chris Rugaber, AP — GDP 3Q and 4Q results. A: Moody’s guessed a 0.6-point hit from the storm (which I think is built-in — Ed.). Retail sales rebuilding effect has kicked in already (really? in just a month?). Bounce in Q4 will be smaller (+0.3 to +0.4 points). Rebound effect will be hard to peg.

Michael Kahn, Accounting Today — re credibility of $4,000 pay boost from tax reform. Depends on nature of reform. Didn’t ask how to pay for it. Potential impact on increasing interest rates. Only went halfway in analysis.

Will update shortly on the YTD BLS v. ADP numbers.

UPDATE: Through September, ADP was at 1.878 million jobs added this year, and BLS was at 1.334 million. That’s a difference of 544,000.

IF BLS comes in at 300K on Friday with no prior-month revisions, the difference will still be 479K (544K minus 65K), with year-to-date totals of 2.113 ADP vs. 1.634 million BLS.

The benchmark revision to which Zandi referred shows that 98,000 more people were on payrolls in March 2017 than originally estimated. That estimate, if I recall correctly, is spread from April 2015 to March 2017, so you would think that the impact on the first three months of 2017 would be minor.

So the question remains: Is BLS missing a lot of jobs, or is ADP overstated? Based on Zandi’s contention, it appears to be the former.

I still maintain that one has to be open to the possibility that BLS has been sandbagging the numbers until it absolutely has to revise them up. It strains credibility that BLS can be missing 23 percent (479K divided by 2.113 million) of the jobs ADP has reported through ten months.

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2 Comments

  1. Not in labor force #: still flat lining!!!!

    https://data.bls.gov/timeseries/LNS15000000

    The U6 still doing great, part timers are getting full time jobs and that’s pushing more families to the median income level. The trajectory is still heading down, given the holiday hiring season this means a lot of people stuck on the sidelines with zero jobs will now get an entrance into the labor force and be given a chance to prove their stuff and maybe a shot at a full time job as well. Very good numbers here. The charts tell the story here.

    For September 2017 the official Current U-6 unemployment rate was down drastically from 8.6% in August to 8.0% in September. It was 8.9% in July and June. Typically unemployment peaks in January and then again in July so we may be seeing some of the typical cyclical fluctuations but a drop from of almost a full percentage point from July to September is still an exceptional move.

    And even more amazingly it was 10.1% in January (i.e. only 8 months ago!) and it was 9.3% a year ago (i.e. exactly at this same point in the yearly cycle).

    https://unemploymentdata.com/current-u6-unemployment-rate/

    And now the icing:

    All employees, thousands, total nonfarm, not seasonally adjusted

    https://data.bls.gov/timeseries/CEU0000000001

    The chart continues to show a positive consistent trajectory. Come January 2018 we should see a solid 145,000,000 people with a job AFTER the normal lay off cycle that comes after Christmas.

    BTW – IF you run the data set back to 1939, you will see that Obama’s reign of incompetence created thee longest period required to recover employment levels since the records were kept. It took from 2008 to 2014 (6 years) for the economy to recover a similar break even of raw (both part and full time lumped together) total employment. While this current positive trajectory has been in place since 2010, it has literally set the job creation pace back 6 years, that’s around 20 million jobs not created conservatively estimated. Which is reflected in the run up of SNAP recipients from 17 million to now 41 million. We need to get these people productive and to do that, ALL, EVERY Last illegal MUST GO HOME. When these people are employed and paying taxes, the whole world will benefit from their full throated participation in the economy. Jobs in the US create jobs in the rest of the world, it is NOT a zero sum game. The cheapskates who import labor to the US in effect contribute to world poverty by idling US citizens. WE ARE the WORLD’S ECONOMIC ENGINE.

    Comment by dscott — November 1, 2017 @ 4:54 pm

  2. [...] Mark Zandi at ADP on Wednesday’s conference call: 300,000 jobs added. [...]

    Pingback by BizzyBlog — November 3, 2017 @ 8:29 am

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