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Economy in Brief

ADP National Employment Report & U.S. Payrolls
by Carol Stone and Tom Moeller May 3, 2006

Today, ADP, the well-known payroll processors for many employers, published an estimate of the upcoming nonfarm payroll data for April, pointing to an increase in private sector employment of 178,000 for the month (1.9% y/y). They have compiled this from their substantial database of individual companies' payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator meant to project the BLS's official number. This 178,000 gain would follow March's 133,000 rise.

These data are called the "ADP National Employment Report". The series will be maintained in Haver's USECON database; historical data go back to December 2000. Importantly, the figures in this report cover only private sector jobs and exclude employment in the public sector, which grew an average of 13,000 per month over the last year. The monthly change also obviously varies, and indeed ranged from a decline of 34,000 to an increase of 35,000. This would be a significant difference between the ADP number and total nonfarm payrolls. Some analysts indicated that ADP's April estimate of 178,000 in private sector jobs would correspond to a gain in total payrolls of 200,000.

Unlike other indicators of the US labor market, such as unemployment insurance claims, the ADP measure is directly comparable to the kind of data in the official BLS report. Automatic Data Processing, Inc. is the nation's leading provider of payroll-related services. Their figure is based on information about 24,000,000 jobholders; this is distilled to cover the numbers actually on payrolls during the BLS survey week, about 14,000,000. The report will be issued at 8:15AM on the Wednesday prior to each employment release.

According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90. The estimator is shown by the firms' analysis to outperform current "consensus" forecasts and models based on claims data.

The full ADP National Employment Report can be found here, and their methodology is explained here.

LAXEPA@USECON April Mar Y/Y 2005 2004 2003
Nonfarm Private Payroll Employment (Chg.) 178,000 133,000 1.9% 1.7% 1.3% -0.4%
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