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Economy in Brief

ADP Report: Payroll Employment Fell By 693,000
by Tom Moeller January 7, 2009

The payroll processor ADP indicated in its latest National Employment Report that December private nonfarm payrolls fell 693,000. The decline followed a revised 476,000 November drop that was much deeper than the initial estimate. The latest was the eleventh consecutive monthly decline. During the last three months payrolls have fallen 1.3%.

The U.S. Bureau of Labor Statistics will report on December payroll employment this Friday. Last month, the 476,000 worker decline (-1.6% y/y) in ADP's measure of private nonfarm payrolls was accompanied by a 540,000 worker decline (-1.8% y/y) in the BLS measure of private sector payrolls.

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. ADP indicated in today's report that it is the first to incorporate key methodological revisions. These revisions include improved modeling techniques and additional data sources to better accommodate inherent differences between the ADP and BLS data. The impact on recent estimates was to revise the monthly declines in employment much deeper.

Employment in the service producing industry was most pronounced. December payrolls fell 473,000 (-1.5% y/y), the eleventh consecutive monthly decline and the service sector estimates are the source for most of the downward revision in the overall payroll figure. Medium sized payrolls fell 215,000 (-1.8% y/y) and small sized payrolls fell 201,000 (-1.1% y/y). Large service producing payrolls dropped by 57,000 (-1.8% y/y).

Weakness in goods producing payrolls added to the service sector's decline. Payrolls fell by 220,000 (-5.6% y/y). The largest decline was amongst medium sized payrolls which fell 106,000 (-5.5% y/y) followed by an 80,000 (-5.3% y/y) drop in small sized payrolls. Large payrolls fell 34,000 (-6.4% y/y).

Employment in the manufacturing sector fell 120,000 (-5.1% y/y) It has fallen in most every month since 2001.

 ADP compiled the estimate from its 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.

The ADP National Employment Report data is maintained in Haver's USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which rose an average 11,083 during the last twelve months.

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

LAXEPA@USECON December November Y/Y 2008 2007 2006
Nonfarm Private Payroll Employment (m/m Chg.) -693,000 -476,000 -2.2% -0.4 1.2% 2.0%
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