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Economy in Brief

ADP Report: Sharp Decline In Nonfarm Payroll Employment Continues
by Tom Moeller September 30, 2009

The sharp decline in payroll employment continued this month, but the rate of decline recently has stabilized. The latest report from the payroll processor ADP, in their National Employment Report, indicated that private nonfarm payrolls fell 254,000 during September. That followed a revised 277,000 August decline which was slightly shallower than reported initially. The latest reading was the twentieth consecutive monthly decline. The monthly change was, however, the smallest since July of last year and two-thirds the size of the worst reading last March. The three-month annualized rate of decline in payrolls also eased to 3.2% from its March record of 7.1%.

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 U.S. Bureau of Labor Statistics will report September payroll employment this Friday. For comparison, the August decline of 277,000 in ADP's measure of private nonfarm payrolls was accompanied by a loss of 198,000 jobs 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 reported that small-sized payrolls again fell the most this month and posted a 100,000 decline (-4.4%). That was similar to the 93,000 (-5.7% y/y) decline in medium-sized payrolls. Large payrolls fell by 61,000 (-5.7% y/y). The steady decline in service-producing industry employment continued. The September drop, which measured 103,000 (-3.2% y/y), was the eighteenth consecutive monthly decline but in percentage terms the three-month rate of change moderated to -1.8%. The recent declines are less than two-thirds the worst from December through March. Medium-sized service payrolls fell 38,000 (-3.6% y/y) and small-sized payrolls declined 38,000 (-2.9% y/y). Large service producing payrolls dropped by 27,000 (-3.5% y/y).

In the goods producing sector there were 151,000 fewer jobs in September (-13.4% y/y). Here, the three-month rate of change eased again but only to -9.6% versus -17.3% at its worst. Small-sized payrolls fell 62,000 (-13.1% y/y) followed by a 55,000 (-13.7% y/y) drop in medium-sized payrolls. Large payrolls fell 34,000 (-13.4% y/y). In the manufacturing sector alone, payrolls fell a steady 74,000 (-12.8% y/y).

The ADP National Employment Report data is maintained in Haver's USECON database; historical figures date 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.

[email protected] September August Y/Y 2008 2007 2006
Total Nonfarm Private Payroll Employment (m/m Chg., 000s) -254 -277 -5.1% -0.5% 1.2% 2.0%
   Small Payroll (1-49) -100 -114 -4.4 -0.0 1.6 2.2
   Medium Payroll (50-499) -93 -106 -5.7 -0.5 1.2 1.9
   Large Payroll (>500) -61 -57 -5.7 -1.6 -0.1 0.4
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