Sunday, 18 of February of 2018

Economics. Explained.  

ADP Employment

January 31, 2018

As shown above the ADP survey shows an impressive correlation with the private sector portion of the payroll employment data to be released a couple of days later.  And well it should.  ADP, or Automatic Data Processing, Inc. is a provider of payroll-related services. Currently, ADP processes over 500,000 payrolls, for approximately 430,000 separate business entities, covering over 23 million employees.  The survey has been in existence since January 2001, and its average error has been 60 thousand.  So while it is not perfect, it does have a respectable track record.

In January the ADP survey showed an increase of 234 thousand jobs after rising by 242 thousand in December.  Over the past three months  the trend rate of ADP employment is 227 thousand.    On Friday BLS will release the payroll employment statistics for December.  We look for an increase of about 200 thousand.

Jobs in goods-producing industries  rose 22 thousand in January following an increase of 49 thousand in December–  construction employment rose 9 thousand, mining climbed by 1 thousand,  and manufacturing rose by 12 thousand.   Service providers boosted payrolls by 212 thousand in January after rising by 193 thousand in December.  The  January  increase was led by an increase of 46 thousand in professional and business jobs,  41 thousand in health care, 6 thousand in education,  46 thousand jobs in leisure and hospitality, an increase of 51 thousand jobs in trade, transportation, and utility workers, and 16 thousand in financial services..

With the labor force rising very slowly, employment gains of 190 thousand or so will continue to slowly push the unemployment rate lower.  The unemployment rate currently is 4.1% which is below the full employment threshold.  As a result we are beginning to see more and more shortages of available workers, and we are also beginning to see upward pressure on both wage rates and inflation.

The stock market is at a record high level.  Interest rates remain low in the U.S..  Consumers remain confident.  Gasoline prices  are now steady at about  $2.57 per gallon. Corporate earnings are at a near record high level.  Firms are flush with cash.  And the economy will soon receive stimulus in the form of both individual and corporate income taxes.  Thus, our conclusion is that the economy will expand by 3.0% in 2018 versus 2.5% last year.

Stephen Slifer


Charleston, SC

Leave a comment