Wednesday, 22 of May of 2019

Economics. Explained.  

ADP Employment

May 1, 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 65 thousand.  So while it is not perfect, it does have a respectable track record.

The ADP survey said that employment jumped 275 thousand in April after having risen 151 thousand in March after having climbed by 220 thousand in February.  In the most recent 3-month period employment has risen 215 thousand.   On Friday we expect the BLS to report that private sector employment rose  about 190 thousand in April.

Jobs in goods-producing industries  rose 56 thousand in April after having fallen 1 thousand in April   —  construction employment rose 49 thousand, mining fell by 2 thousand,  and manufacturing rose 5 thousand.   Service providers boosted payrolls by 223 thousand in April after having climbed 152 thousand in March.  The April increase was led by an increase of 59 thousand in professional and business jobs,  46 thousand in health care,  25 thousand in administration and support, 9 thousand in education, 53 thousand jobs in leisure and hospitality, 37 thousand jobs in trade, transportation, and utility workers, and 6 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 3.8% 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 1.0%.  Despite the seemingly tight labor market there is little upward pressure on the inflation rate.

The stock market has rebounded and is now at a record high level.   Interest rates will remain steady through the end of the year.  Consumers remain confident.  Corporate earnings are solid.  The economy is still receiving some stimulus in the form of both individual and corporate income taxes.  Thus, our conclusion is that the economy will expand by  2.7% in 2019 after having risen 3.0% last year.

Stephen Slifer


Charleston, SC

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