What should we make of this morning’s National Employment Report?
It should be considered good news that the report estimates 187,000 private sector jobs were created in January. After all, the average of the various guesses by economists was 140,000, according to Bloomberg News, which does a monthly survey.
But within minutes of the release of the ADP sponsored report, stock futures dipped, and then, when the market opened in New York at 9:30, the Dow began to pull back from Tuesday’s high. Meanwhile, the Wall Street Journal published a blog post headlined “ADP Jobs Report Shows Hottish Job Market – But Is It Hot?”
There are probably as many reasons for today’s stock market fluctuations as there are headlines, so it wouldn’t be fair, nor accurate, to suggest any significant linkage between today’s market action and the ADP report.
However, the ADP report is considered a harbinger of the government’s monthly employment report, which is typically released two days later. The monthly Employment Situation Summary covering December will be released in Washington on Friday.
From data compiled from surveys of employers and households across the country, the U.S. Bureau of Labor Statistics reports job creation and loss in the preceding month. The report also contains a great deal more, including wage changes, the national unemployment rate, workweek hours, and the demographics of the labor force. Since the recession began, this report has often been a market mover.
As of this morning, economists, on average, are expecting that the government will report about 140,000 (MarketWatch and Bloomberg) (136,000 Dow Jones survey) jobs created in January. Some of the surveys predict the unemployment rate will rise to 9.5 percent from 9.4 percent.
However, as you consider these predictions, and the ADP bell cow report, bear in mind that the job estimates are averages of multiple predictions that can show a stunning range. For instance , in the Bloomberg survey of what economists expected the ADP report to show the guesses ranged from a loss of 100,000 jobs to a gain of 200,000; the 140,000 estimate was nothing more than an average of these guesses.
There’s also a great deal of uncertainty about the predictive value of the ADP report.
As the Wall Street Journal post noted, quoting an economist with High Frequency Economics, “We are struggling to make sense of these numbers.”
Since the National Employment Report numbers are based on ADP’s payroll processing data — and ADP handles only private sector payrolls — the numbers don’t include government employment, which has been declining for months.
Article Continues Below
In addition, ADP’s 500,000 payrolls cover over 23 million employees. A big share of the American workforce to be sure, but even so, the numbers require statistical adjustment, which is done by ADP’s partner, Macroeconomic Advisers.
Rarely have the numbers tracked well with the Labor Department’s. Today’s ADP report included a 50,000 downward adjustment in the job count for November. ADP initially reported 297,000 jobs were created in November. The BLS report two days later put the official job increase at 103,000. That number, typically, will also be revised in Friday’s report.
Despite all these vagaries, it would be wrong to dismiss the job reports. For one, the trend is clearly up. The U.S. economy is creating jobs. How fast? Not fast enough to appreciably change the unemployment numbers. On that, everyone agrees.
Dig deeper into the reports and there’s a wealth of useful information about where the jobs are being created or lost; the industry sectors that are changing; and the geographies involved.
The ADP report notes: “Employment among large businesses, defined as those with 500 or more workers, increased by 11,000 while employment among medium-size businesses, defined as those with between 50 and 499 workers, increased by 79,000. Employment among small- size businesses, defined as those with fewer than 50 workers, increased by 97,000.”
Thursday, the Monster Employment Index will be released. It may not get the business press attention the ADP report does, but it offers recruiters even deeper and more valuable pointers about hiring. If you need help seeing how it can help, Monster’s Knowledge Officer provides advice.