Wednesday, 20 of June of 2018

Economics. Explained.  

ADP Employment

May 2, 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 April the ADP survey showed an increase of 204 thousand jobs after rising by 228 thousand in March.  Over the past three months  the trend rate of ADP employment is 224 thousand.    On Friday BLS will release the payroll employment statistics for April.  We look for an increase of about 200 thousand.

Jobs in goods-producing industries  rose 44 thousand in April after having climbed 53 thousand in March  —  construction employment rose 27 thousand, mining climbed by 7 thousand,  and manufacturing rose by 10 thousand.   Service providers boosted payrolls by 160 thousand in April after having risen 175 thousand in March.  The  April  increase was led by an increase of 34 thousand in professional and business jobs,  20 thousand in administrative and support positions, 35 thousand in health care, 36 thousand jobs in leisure and hospitality, an increase of 14 thousand jobs in trade, transportation, and utility workers, and 7  thousand in financial services..

With the labor force rising very slowly, employment gains of 200 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 very volatile lately as tariff announcements and tech surprises occur almost daily.  Nevertheless, it only about 10% below its peak level for the cycle.  Interest rates remain low in the U.S..  Consumers remain confident.  Gasoline prices  should be peaking at about  $2.65 per gallon. Corporate earnings are solid.  Firms are flush with cash.  And the economy is beginning to receive stimulus in the form of both individual and corporate income taxes.  Thus, our conclusion is that the economy will expand by 2.8% in 2018 versus 2.5% last year.

Stephen Slifer


Charleston, SC

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