Written by Alex Kowalski
The labor market may be perking up, a report from ADP Employer Services suggested today.
Then again, maybe it’s not.
Private employers added 162,000 workers in September, according to the Roseland, New Jersey-based firm. That’s more than economists surveyed by Bloomberg were predicting.
The ADP figures are scrutinized for clues to the Labor Department’s payrolls report, released two days later. Friday’s figures will be the next-to-last official snapshot of the job market before the Nov. 6 election.
One caveat: the two reports are based on different samples.
The Labor Department sends a survey each month to employers covering almost 500,000 work-sites asking for data on payrolls, hours and earnings. ADP analyzes payroll data from its clients.
So what do the ADP numbers tell you about what to expect on Friday?
The 162,000 ADP figure exceeds the 129,000 increase in private employment that economists are forecasting for the Labor Department report. Total employment, including government workers, probably climbed by 115,000, according to the median forecast.
Michael Carey, Credit Agricole CIB’s chief economist for North America, cautions that the ADP figures have an imperfect record of predicting the Labor Department’s numbers.
“Over the long term, there’s a relatively high correlation coefficient, but ADP’s performance recently has been off,” Carey said from New York. “If you go and change your forecast to take ADP into account, you’ll get it wrong. If you don’t change it, then you’ll get it wrong.”
While ADP’s figures parallel those released by the Labor Department fairly closely in the past decade (largely because they are subsequently revised to better match the government data), in the short run the two measures often go in different directions.
Just last month, the ADP reported that private employers added 201,000 workers in August — almost double the Labor Department’s figure of 103,000.
Forecasters might be better off sticking to their own projections. Economists surveyed by Bloomberg misprojected the government’s initial private payrolls release by an average of 46,000 in the 12 months ended in August, according to their median estimates. ADP was off by an average of 57,000.
Carey predicts the Labor Department report will show a total of 135,000 jobs were created in September. He raised his estimate from 125,000, but not because of the ADP report: data this week from the Institute for Supply Management showed manufacturing hiring was stronger than anticipated.
And even if the ADP numbers prove on Friday to be accurate predictors, they don’t indicate that employment is going strong, Carey said.
“The labor market is still sluggish,” he said.