Tuesday, 19 of February of 2019

Economics. Explained.  

ADP Employment

January 30, 2019

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.

For January the ADP survey said that employment rose 213 thousand.    In the most recent 3-month period employment has risen 208 thousand.  This is the first solid data we have for the economy in the first quarter.  It is important because 800,000 government workers were not paid for that  month.  The ADP reports tells us that employment just kept chugging along in that month despite the government shutdown.  On Friday BLS will release the payroll employment statistics for January.  We look for an increase of about 140 thousand after the outsized 301 thousand increase in December.

Jobs in goods-producing industries  rose 68 thousand in January after having climbed 44 thousand in December   —  construction employment rose 35 thousand, mining declined by 1 thousand,  and manufacturing rose by 33 thousand.   Service providers boosted payrolls by 145 thousand in January after having risen 219 thousand in December.  The January increase was led by an increase of 46 thousand in professional and business jobs,  37 thousand in health care,  1 thousand in education, 31 thousand jobs in leisure and hospitality, an increase of 13 thousand jobs in trade, transportation, and utility workers, and 11  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 3.9% 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 should continue its rebound 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  2.8% in 2019 after having risen 3.1% last year.

Stephen Slifer

NumberNomics

Charleston, SC


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