Economy

ADP Payrolls Suggests Stronger Labor Department Payrolls Report

Jon C. Ogg

Published: January 6, 2016 9:50 am

Last Updated: January 13, 2020 3:23 pm

Wednesday’s market focus seems much more focused on and worried about claims of a hydrogen bomb test in North Korea than on economic reports. Still, economic reports are probably more verifiable and quantifiable than what foreign leaders may or may not be doing. ADP has released its National Employment Report for the month of December, and many investors use this as a proxy for each month’s unemployment and payrolls report from the U.S. Department of Labor.

The first thing that investors and economic watchers may notice is that the ADP report was strong enough that it could create a need for economists to ratchet higher their estimates for payrolls this Friday in the formal Labor Department report.

ADP announced that December’s private sector employment increased by some 257,000 jobs. Bloomberg had its Econoday consensus estimate at only 190,000, and the absolute highest economist estimate was listed as 227,000. Despite international weakness and internal U.S. pressure from other weak economic readings, this would theoretically bring continued support and cover for the Federal Reserve to keep gradually hiking interest rates.

The ADP National Employment Report is produced by ADP in collaboration with Moody’s Analytics, and it is derived from ADP’s actual payroll data. The report aims to measure the change in total nonfarm private employment each month, and the report is shown on a seasonally adjusted basis.

Of the 257,000 jobs, the breakdown was as follows:

• Small businesses (under 50 employees) added 95,000.
• Medium-sized businesses (50 to 499 employees) added 65,000.
• Large businesses (500+) added 97,000.

The industry-by-industry breakdown was as follows:

• Construction added 24,000.
• Manufacturing added only 2,000.
• Trade/transportation/utilities added 38,000.
• Financial activities added 13,000.
• Professional/business services added 66,000.

Ahu Yildirmaz, vice president and head of the ADP Research Institute, said:

2015 had a strong close with December showing the largest job gains of the year. Overall, the average monthly employment growth was just under 200,000 for the year in contrast to almost 240,000 jobs per month in 2014. Weakness in the energy and manufacturing sectors was mostly responsible for the drop off.

Mark Zandi, chief economist of Moody’s Analytics, said:

Strong job growth shows no signs of abating. The only industry shedding jobs is energy. If this pace of job growth is sustained, which seems likely, the economy will be back to full employment by mid-year. This is a significant achievement, given that the last time the economy was at full employment was nearly a decade ago.