Tuesday, 26 of September of 2017

Economics. Explained.  

ADP Employment

August 30, 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 August the ADP survey showed an increase of 237 thousand job.  The July gain was revised upwards from an increase of 178 thousand to 201 thousand.   Over the past three months  the trend rate of ADP employment is 210 thousand.    On Friday BLS will release the payroll employment statistics for July.  We look for an increase of about 190 thousand.

Jobs in goods-producing industries which includes manufacturers and builders employment rose 33 thousand  —  construction employment rose 18 thousand, mining fell by 1 thousand,  and manufacturing climbed by 16 thousand.  That follows an increase of 11 thousand in July.  Service providers boosted payrolls by 204 thousand in August after having risen 190 thousand in July.  The  July  increase was led by an increase of 39 thousand in professional and business jobs,  45 thousand in health care and education,  56 thousand in trade, transportation, and utilities, 11 thousand financial jobs and 51 thousand jobs in leisure and hospitality.

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 4.3% which is below the full employment threshold.  As a result people are beginning to talk more and more about shortages of available workers, and we will 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 considerable stimulus later this year or in 2018 in the form of both individual and corporate income taxes.  Thus, our conclusion is that the economy will expand by 2.4% in 2017 and 2.8% in 2018.

Stephen Slifer


Charleston, SC

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