The return of ADP’s monthly private sector employment report offered a comparatively lackluster snapshot of the US labor market.
Following a monthslong hiatus, ADP, in collaboration with the Stanford Digital Economy Lab, said private sector employment increased by just 132,000 in August (figure below). That was less than half of the 300,000 consensus expected and missed the lowest estimate from 15 economists.
I won’t pretend to know whether forecasters incorporated any enhancements or improvements from the revamped methodology. The new series showed US employers added 270,000 jobs in July, nowhere near the private payrolls number from the government’s report.
August’s headline print was the lowest since January of 2021, when private employers shed jobs for a second consecutive month amid a vicious winter COVID wave.
“Our data suggests a shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy’s conflicting signals,” ADP Chief Economist Nela Richardson said Wednesday, in an effort to help the public “decipher” ADP’s new report.
The services sector added 110,000 jobs in August, the vast majority of which were in leisure and hospitality (figure below). Multiple categories showed job losses, including financial services, professional services and education and health services.
Notably, the new series showed leisure and hospitality lost jobs in July.
By business size, the picture was mixed. The smallest firms shed 47,000 jobs, the largest added 54,000. Firms with between 20 and 249 employees added a combined 146,000 positions between them.
By region, the South added the most jobs (76,000), while Midwest employers dropped a net 7,000 people from payrolls.
New “pay insights” from ADP suggest job switchers (they call them “changers,” but for my money, I’d go with “shape shifters”) saw a median annual pay increase of 16.1%, versus just 7.6% for job stayers. “While the pace of pay increases is elevated, its growth has flattened,” ADP said. Annual pay growth was strongest among large firms, at over 8%.
It’s hard to know what to make of the numbers on a quick read, but Richardson summed it up. “We could be at an inflection point,” she said, suggesting the US labor market is transitioning “from super-charged job gains to something more normal.”
I’m not sure anyone remembers what “normal” feels like. And I don’t think anyone has a feel for what “normal” will look like going forward.
Lol. Great points on “normal.”
It would sure be interesting to know what changes ADP made. ADP reports have done a terrible job of late in forecasting the same-month jobs report, but I don’t know if that’s true for the revised jobs report. ADP supposedly covers 25 million employees, it seems like it’s data should be sound, which begs the question of whether the jobs report is. It is a shame that ADP, Paychex, and the other major payroll processors don’t cooperate in a joint product. It is also a shame that there isn’t some stick/carrot way for the Federal govt to get all the private payroll processors’ data and use it to make BLS survey-based data better (or supplant it).
H-Man, the new ADP metric may be more accurate to predict job growth. If based upon writing checks to employees, not a bad idea, So, if that metric shows 134,000 new jobs and NFP does the same, does that change the dance for the Fed?