ADP: U.S. Private Sector Job Growth Accelerates Less Than Expected

by Ike Obudulu Posted on July 3rd, 2019

Payroll processor ADP released a report on Wednesday showing private sector job growth reaccelerated in the month of June but still came in below economist estimates.

ADP said private sector employment climbed by 102,000 jobs in June after rising by an upwardly revised 41,000 jobs in May.

Economists had expected employment to increase by about 140,000 jobs compared to the addition of 27,000 jobs originally reported for the previous month.

“Job growth has slowed sharply in recent months, as businesses have turned more cautious in their hiring,” said Mark Zandi, chief economist of Moody’s Analytics.

He added, “Small businesses are the most nervous, especially in the construction sector and at bricks-and-mortar retailers.”

The report said employment in the service-providing sector jumped by 117,000 jobs in June, with notable job growth visible in the healthcare/social assistance industry.

However, the increase was partly offset by the loss of 15,000 jobs in the goods-producing sector, which reflected a drop of 18,000 construction jobs.

ADP said employment at large and mid-sized businesses climbed by 65,000 jobs and 60,000 jobs, respectively, although employment at small businesses fell by 23,000 jobs.

“While large businesses continue to do well, small businesses are struggling as they compete with the ongoing tight labor market,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.

On Friday, the Labor Department is scheduled to release its more closely watched monthly employment report for June.

Employment is expected to increase by 160,000 jobs in June after rising by 75,000 jobs in May, while the unemployment rate is expected to hold at 3.6 percent.

ADP and NFP

The ADP payroll report is the precursor to the Labor Department’s Employment Situation Report, colloquially known as Non-Farm Payrolls or just NFP which will be issued this Friday at 8:30 am EDT, 12:30 GMT.

This report provides a detailed analysis of the US labor market beginning with statistics on total US payrolls and additions. It separates the jobs numbers into myriad categories–private and government payrolls, type of employment, age, racial and gender differentiated unemployment rates and many others. The Bureau of Economic Analysis (BEA), a division of the Labor Department, tracks average hourly earnings monthly and annually, average work week (hours) and the labor force participation rate. The report gives the most comprehensive picture of the US labor market and is the best known and most widely traded US economic statistic.

There is a directional correlation between the private ADP figures and the overall US employment numbers. The two numbers generally move in the same direction each month though the amount of the rise or fall is not well correlated.

The February report was a good example. Non-farm payrolls dropped from 311,000 in January to 20,000 in February and ADP fell from 300,000 to 183,000.

ADP and NFP: Difference in degree

The report from ADP, released two days before the BEA statistics each month is a useful guide to the Labor Department numbers for the overall economy.

The main difference between the two reports is that ADP records just the hiring of its own clients, 411,000 US firms employing nearly 24 million workers. The BEA covers the entire US economy.

The BEA receives reports on actual hiring each month by firms of all sizes nationwide. It also estimates the number of jobs created by newly formed small businesses which are the largest source of employment growth. These positions have not yet been reported to the government. The government periodically adjusts the estimated number of positons by the actual figures resulting in annual revisions to the payroll numbers.

The BEA also includes government hiring and firing at the local, state and Federal level.

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