Wednesday, 22 of November of 2017

Economics. Explained.  

ADP Employment

November 1, 2017

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 61 thousand.  So while it is not perfect, it does have a respectable track record.

In October the ADP survey showed an increase of 235 thousand jobs compared to a revised 110 thousand increase in September as Hurricanes Harvey and Irma took their toll in both months.  Over the past three months  the trend rate of ADP employment is 191 thousand.    On Friday BLS will release the payroll employment statistics for September.  We look for an increase of about 300 thousand.

Jobs in goods-producing industries which includes manufacturers and builders employment rose 85 thousand  —  construction employment rose 62 thousand, mining rose by 1 thousand,  and manufacturing climbed by 22 thousand.  That follows an increase of 44 thousand in September.  Service providers boosted payrolls by 150 thousand versus an increase of only 65 thousand in September.  The  October  increase was led by an increase of 68 thousand in professional and business jobs,  39 thousand in health care and education,  45 thousand jobs in leisure and hospitality, and an increase of 34 thousand in administration and support jobs.  However, there  was a loss of 50 thousand jobs for trade, transportation, and utility workers — i.e., the hurricane effect.  This series had on average been rising by about 25 thousand per month.  Thus, the overall increase in ADP employment of 235 thousand appears to understate the true employment increase in that month by 75 thousand workers.

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 4.2% 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 near a record high level.  Interest rates remain low in the U.S..  Consumers remain confident.  Gasoline prices  are now steady at about  $2.20 per gallon. Corporate earnings are at a near record high level.  Firms are flush with cash.  And the economy could receive some stimulus later  in 2018 in the form of both individual and corporate income taxes.  Thus, our conclusion is that the economy will expand by 2.3% in 2017 and 2.8% in 2018.

Stephen Slifer

NumberNomics

Charleston, SC


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