Friday, 14 of December of 2018

Economics. Explained.  

ADP Employment

December 6, 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 October the ADP survey showed an increase of 179 thousand in November after having risen 225 thousand in October.  Over the past three months  the trend rate of ADP employment is 204 thousand.    On Friday BLS will release the payroll employment statistics for November.  We look for an increase of about 190 thousand.

Jobs in goods-producing industries  rose 16 thousand in November after having climbed 44 thousand in October   —  construction employment rose 10 thousand, mining climbed by 2 thousand,  and manufacturing rose by 24 thousand.   Service providers boosted payrolls by 163 thousand in November after having risen 181 thousand in October.  The November increase was led by an increase of 25 thousand in professional and business jobs,  32 thousand in admin and support, 37 thousand in health care,  12 thousand in education, 26 thousand jobs in leisure and hospitality, an increase of 18 thousand jobs in trade, transportation, and utility workers, and 8  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 3.7% which is well below the full employment threshold.  As a result we are beginning to see more and more shortages of available workers.  However, at this point most of the upward pressure on wages is being countered by a corresponding increase in productivity.   Over the past year unit labor costs, or labor costs adjusted for the increase in productivity rose 0.9%.  Despite the seemingly tight labor market there is little upward pressure on the inflation rate.

The stock market has had a tough couple of months but, finally, but it renew its ascent in the months ahead.   Interest rates are rising slowly but remain low.  Consumers remain confident.  Corporate earnings are solid.  The economy is receiving stimulus in the form of both individual and corporate income taxes.  Thus, our conclusion is that the economy will expand by 3.1% in 2018 versus 2.8% in 2019.

Stephen Slifer


Charleston, SC

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