US: ADP Employment Report

Wed Mar 04 07:15:00 CST 2015

Consensus Consensus Range Actual Previous Revised
ADP employment 220,000 200,000 to 245,000 212,000 213,000 250,000

ADP sees slowing for Friday's February payrolls, estimating that private payrolls rose 212,000 which is 8,000 below consensus for the ADP report. But ADP's data also includes a big upward revision for January, to 250,000 vs an initially reported 213,000. The results aren't likely to shift expectations for Friday's government data where the corresponding Econoday consensus is 225,000 vs January's 267,000.

Breaking down ADP's estimate, service-providing industries are up 181,000 in February vs 206,000 in January with goods-producing industries up 31,000 vs 45,000. Further detail shows professional services up 34,000 vs January's 49,000 with construction up 31,000 vs 45,000. Growth in trade & transport is 31,000, down from 50,0000. Financial activities are up 20,000 vs 15,000 with manufacturing up only 3,000 vs a gain of 15,000 in January.

Market Consensus Before Announcement
ADP private payroll employment showed slowing in job growth for January, to a lower-than-expected 213,000 for private payrolls. The BLS estimate for January private payrolls posted at 267,000.

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.