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Economy in Brief

ADP Report: Job Cuts Abate Despite Severe Weather
by Tom Moeller March 3,2010

Two large snowfalls last month weren't enough to keep job cuts from shrinking substantially. The payroll processor ADP, in its National Employment Report, indicated that February nonfarm payroll levels declined 20,000 following a revised 60,000 January decline that was deeper than initially reported. The latest reading was the twenty-fifth consecutive monthly decline though it was the smallest of the downturn. The three-month rate of decline eased to -0.9% from its worst of -7.7% last March.

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 February payroll employment this Friday. For comparison, the January decline of 60,000 in ADP's measure of private nonfarm payrolls was accompanied by a loss of 12,000 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 service-producing industry employment rose for the second consecutive month with a gain of 17,000 (-1.7% y/y). The three-month annual rate of decline eased again to -0.2% versus -5.3% at its worst last March. Small-sized payrolls grew for the second month by 7,000 (-1.4% y/y) while medium-sized payrolls grew a larger 13,000 (-2.0% y/y). These increases were accompanied by a 3,000 decline  (-2.4% y/y) in large service producing payrolls

In the goods producing sector employment fell another 37,000 during February (-9.9% y/y). The three-month annual rate of decline eased again to -4.3% versus -18.1% at its worst last March. Small-sized payrolls fell 25,000 (-10.3% y/y) while medium-sized payrolls fell 5,000 (-9.3% y/y). Large payrolls fell a greatly diminished 7,000 (-10.3% y/y). In the manufacturing sector alone, payrolls rose 3,000 (-7.8% y/y) for the largest m/m increase since early 2006. The three-month change moderated to -1.9% from -17.5% last March.

The latest ADP report reflects updated estimates of historical seasonal factors. Also, the reference month for establishing the levels of employment is changed from March 2008 to March 2009.

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

ADP National Employment Report February January December Y/Y 2009 2008 2007
Total Nonfarm Private Payroll Employment (m/m Chg., 000s) -20 -60 -149 -3.2% -4.9% -0.7% 1.1%
   Small Payroll (1-49) -18 -26 -51 -2.7 -4.1 -0.1 1.8
   Medium Payroll (50-499) 8 -10 -56 -3.4 -5.7 -0.9 1.0
   Large Payroll (>500) -10 -24 -42 -4.1 -5.6 -1.8 -0.2
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