US: ADP Employment Report

Wed Apr 04 07:15:00 CDT 2018

Consensus Consensus Range Actual Previous Revised
ADP employment 185,000 110,000 to 225,000 241,000 235,000 246,000

ADP sees no let up for strength in the monthly employment report, calling for a 241,000 gain in March's private payrolls. This is the third straight outsized result for ADP and is far above Econoday's consensus for a 175,000 gain in the comparable government measure. The employment report has proven strong to robust over the last five reports, and if March makes for a sixth straight strong result then ADP may start getting new believers in its accuracy.

Market Consensus Before Announcement
Employment reports have proven to be strong and strong has been the recent calls from ADP. But the consensus for March's ADP estimate is looking for slowing, to 185,000 vs 235,000 and 234,000 for ADP in February and January.

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.