economy Markets

ADP Misses By A Mile, Clouding Outlook For August Jobs Report

Given ADP’s recent track record vis-à-vis NFP, I suppose it would be foolish to put too much stock (figuratively or literally) in the latest read on private sector employment.

For three consecutive months, ADP has proven a poor guide when it comes to predicting nonfarm payrolls, and subsequent revisions have been laughably large. In July, for example, ADP posted the largest miss in history, only to be followed up by another big beat on NFP.

Still, market participants were interested for any clues as to whether August payrolls — due Friday, ahead of the long US weekend — will live up to lofty expectations for another big gain. With that as the backdrop, ADP said US firms added 428,000 jobs in August, less than half of the 1 million consensus was looking for.

July’s print was revised higher, but not by much — to 212,000 from 167,000. That will likely be contrasted with last month’s headline NFP print. The disparity is huge and thereby hard to ignore. June was revised higher to 4.49 million from 4.31 million.

The breakdown for August shows the gains were broad-based, with all firm sizes adding positions and both the services and goods-producing sectors posting gains. Leisure and hospitality and education led gains in service sector employment.

ADP says 28,000 construction jobs were added in August, along with 2,000 in mining and natural resources, and 9,000 in manufacturing.

Midsized firms added 79,000 positions last month, while small employers logged a 52,000 gain. Large firms dominated the hiring impulse, adding nearly 300,000 positions.

Again, ADP has failed spectacularly to predict NFP in the post-pandemic world, and forecasters have been equally inept. So it’s not entirely clear that much can be gleaned from this.

If you came into Wednesday not expecting consensus to be any kind of guide, you could plausibly suggest this isn’t actually a “bad” report, despite the ostensible “miss”.

More broadly, the macro narrative remains the same.

“The midsummer resurgence of COVID-19 cases combined with the reality that the path to re-opening the domestic economy has proven more challenging than most anticipated contributes to the collective sense that many firms will soon be forced to make difficult decisions regarding the viability of present business models and staffing levels”, BMO’s Ian Lyngen, Benjamin Jeffery and Jon Hill said Friday, adding that “while this process had been delayed by the initial stimulus efforts on the part of Washington and the Fed, as the bailout programs run their course and the fiscal efforts are exhausted, the new normal (and all its uncertainty) comes into focus”.

I couldn’t have said it better myself.


 

6 comments on “ADP Misses By A Mile, Clouding Outlook For August Jobs Report

  1. mfn says:

    Republicans seem more interested in promoting conspiracy theories than addressing the situation. The party’s fecklessness vis-a-vis all things COVID is setting it up for an historic wipeout in November.

  2. The Republicans are like deer in the headlights having long given up their ability to think and exercise free will. They stood silently while Trump and allies took down first one then another who exercised free will. Now they are simply unable to react.

  3. John Banjo says:

    And the Democrats whiffed on selecting a strong and energizing presidential candidate (again) making this election into an apparent toss up. Must same something about human nature.

    As an aside I believe America desperately needs a multiparty system as this two party one leaves us in a perennial stasis that is repeated every 2 – 4 years while our world deteriorates around us.

    • I’ve said for a year that Dems would be better off embracing Ocasio-Cortez and Ilhan Omar, if not necessarily 100% backing all of their policies. When the other party has a star (Trump) you have to embrace your own stars. As we’re seeing, the GOP is going to equate all Democrats with Progressives anyway. The idea was to put Biden out there and say “see, we’re not ‘radicals'”. And what did Trump do? He turned right around and claimed Biden is a radical anyway. Now Joe is running around promising people he’s not a radical, which comes across as desperate. And here’s the thing: It’s not like AOC or Ilhan or Rashida or Ayanna were going to run for president, so there was no chance of “losing control” (so to speak) of the party if you were Pelosi. She should have leveraged their star power and energy. I don’t pretend to know the “right” way to have done that without alienating centrist voters, but I do know it was a missed opportunity.

      • DoubleB says:

        “As we’re seeing, the GOP is going to equate all Democrats with Progressives anyway.”

        This literally can’t be said enough and is the most damning attribute of the Democratic Party. They’ve fallen for this crap since Dukakis in 1988.

      • Dana says:

        “As we’re seeing, the GOP is going to equate all Democrats with Progressives anyway.”

        You don’t get out much, do you? Let me help you. “As we’re seeing, the GOP is going to equate all Democrats with rapists, murderers, jack-booted Antifa thugs, socialists, rioters, looters, arsonists, communists, baby killers and Satan worshippers who are gonna kick down your door, rape your wife and daughters, take your guns and whisk you away in a black helicopter to work as a slave forever in FEMA camp.”

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