US: ADP Employment Report

Wed Feb 04 07:15:00 CST 2015

Consensus Consensus Range Actual Previous Revised
ADP employment 220,000 210,000 to 266,000 213,000 241,000 253,000

ADP sees slowing in job growth for January, to a lower-than-expected 213,000 for private payrolls vs the Econoday consensus for 220,000 and against ADP's upwardly revised 253,000 for December (initial estimate 241,000). Turning to government data, the corresponding Econoday consensus for Friday's jobs report is 229,000 vs December's 240,000.

The 213,000 increase for January is the lowest since September which was also 213,000. Increases in ADP's data from October to December averaged 257,000. By industries, the largest percentage gain for January comes from construction, up 0.3 percent or 18,000 jobs, and the lowest from manufacturing, up 0.1 percent or 14,000 jobs, and financial activities, also up 0.1 percent or 10,000 jobs.

Market Consensus Before Announcement
ADP private payroll employment growth for December posted at 241,000. This compares with the BLS figure for December private payrolls of 240,000.

The ADP national employment report is computed from a subset of ADP records that represent approximately 400,000 U.S. business clients and approximately 23 million U.S. employees working in all private industrial sectors. ADP contracted with Moody's Analytics to compute a monthly report that would ultimately help to predict monthly nonfarm payrolls from the Bureau of Labor Statistic's employment situation. The ADP report only covers private (excluding government) payrolls.

Market players have become accustomed to the excitement on employment Friday and realize the rich detail of the monthly employment situation can help set the tone for the entire month. While economists have certainly improved their nonfarm payroll forecasts over the years, it is not unusual to see surprises on employment Friday. To that end, the new ADP national employment report can help improve the payroll forecast by providing information in advance of the employment report.

The employment statistics also provide insight on wage trends, and wage inflation is high on the list of enemies for the Federal Reserve. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus. The ADP national employment report does not yet have wage information, but their goal is to provide wage information, along with industry and regional information as well.

By tracking jobs, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.