ADP Employment Report - 201,000 Private Sector Jobs for August 2012

ADP, released their proprietary private payrolls jobs report for August 2012. This month ADP is reporting a gain of 201,000 private sector jobs. July 2012 was revised up by 10,000 to 173,000 private payrolls gains. In contrast, the BLS reported 163,000 private sector jobs for July 2012. Graphed below are the reported private sector jobs from ADP. This report does not include government, or public jobs. ADP rarely mirrors the BLS employment report on a month to month basis.

 

 

ADP's reported private job growth was 185,000 in the service sector. This is the 4th month in a row most of the jobs have been in services. The goods sector only gained 16,000 jobs. Manufacturing, part of the goods sector, grew by 3,000 jobs, not a good showing. Construction gained 10,000 jobs, the best monthly showing since March. ADP's financial services jobs increased by 8,000 jobs, making it 13 months for job gains in the private financial sector.

This report, if it matches Friday's official unemployment report, would overall imply overall moderate job growth. Governments have just been shedding jobs, which are part of the BLS report. The U.S. needs about 100,000 jobs per month just to keep up with population growth.

ADP captures jobs by business size, which is one of the best features of this report, due to it's relativity using the same statistical methods and timeline. In August:

Employment on large payrolls—those with 500 or more workers—increased 16,000 and employment on medium payrolls—those with 50 to 499 workers—rose 86,000 in August. Employment on small payrolls—those with up to 49 workers—rose 99,000 that same period. Of the 86,000 jobs created on medium - sized payrolls, 12,000 jobs were created by the goods-producing sector and 74,000 jobs were created by the service-providing sector.

Below is the graph of ADP private sector job creation breakdown of large businesses (bright red), median business (blue) and small business (maroon). For large business jobs, the scale is on the right of the graph. Medium and Small businesses' scale is on the left.

 

ADP large, medium, small private sector jobs

 

Large business, who lobby Congress for their bad trade deals, more offshore outsourcing and more foreign guest worker importation and labor arbitrage, are almost absent from job creation in terms of hiring Americans. Notice how large businesses cliff dove in 2008, shedding employees, and have not returned at all to pre-recession employment levels. This pattern actually starts just about the time offshore outsourcing and the China PNTR came into effect, year 2000. Small businesses, on the other hand, have increased employment. May I suggest that small businesses are not international, they are not signing offshore outsourcing contracts and moving jobs to India and China. Multinationals, on the other hand, the below decade trend line clearly shows these so called U.S. corporations have abandoned the U.S. worker, on whole. Small businesses usually contain newly started businesses more by percentages.

There is a historic strong mismatch between ADP and the BLS jobs report on a month to month basis. To date, the number of private nonfarm payroll jobs ADP reports versus what the BLS reports and on a month-to-month and even cumulative basis do not match. This monthly error is often large, especially when looking at small job growth overall, or less than 400,000 jobs per month, on a month to month comparison basis. The monthly BLS jobs survey (CES) has a 100,000 payroll jobs overall margin of error.

The below graph shows shows how many private sector payroll jobs, each month, ADP was off by in comparison to what the BLS reported. This is a monthly graph, not cumulative. As we can see, it's rare where the two monthly reports get the exact same private payrolls growth numbers. When the below graph bar is negative, that means the BLS reported a larger number of jobs than ADP did, when the graph bar is positive, it means ADP reported larger private payrolls. Again, these are private sector jobs which is different from the BLS headline number. This graph is updated with the BLS jobs report.

 

ADP vs. BLS

 

Below is the cumulative difference between what the ADP reports as the private nonfarm payroll jobs vs. the BLS (ADP minus BLS). This line shows the divergence, over time in number of nonfarm private payroll jobs reported between the two reports. The difference was stabilizing around 400,000, now increasing once again. This article will is updated with the August BLS private non-farm payrolls data.

 

ADP vs. BLS

 

While ADP notes a simple correlation of 0.95, well, a 5% error between monthly reported jobs numbers is an average, and we can see on some months the differences are quite large and around 2008, the difference started to hit about 900,000 jobs. That said, the reported job growth is so piss pour, statistically we're rolling around in the margin of error each month.

ADP does use the same seasonal adjustment as the BLS, but their other methodology and even sampling size are different, proprietary. That said, ADP has now put up some details of their methodology to explain the statistical differences between their estimate, the actual mathematics, vs. the BLS. This is new, and good ADP is disclosing their entire methodology so we may get more apples to apples comparisons of the two reports. The graph below is the monthly change of private jobs as reported by ADP.

 

 

Regardless of the statistical differences between ADP and the BLS, August's report indicates moderate job growth, not the soaring robust growth the United States needs but an improvement. Sorry folks, 100k range job growth numbers do not mean the Gods are now shining upon us. More we're all simply used to seeing beyond belief, pathetic job growth numbers.

Here is last month's ADP private sector jobs report overview, only graphs revised.

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Conflict between BLS and ADP employment reports

So which (BLS or ADP) should we rely on, if either one? Aside from the disparity in size (96000 vs 201000), the trend is in the opposite direction.
For August, BLS shows a downtrend from prior months, while ADP shows an uptrend.
The pessimists vs. the optimists--pick your politics.

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