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Economy in Brief

Employment Data: What Accounts for the Big Gap Between ADP and the Official Jobs Data?
by Joseph G. Carson ([email protected])  October 1, 2020

September's ADP employment report showed a gain of 749,000, following gains of 481,000 in August and 216,000 in July. While the focus of this month's report is on the large September's gain, the bigger issue is why ADP did not revise up the July and August figures to be more in line with the published private payroll figures.

The ADP employment report is designed to measure the change in private payroll employment. It's not perfect, but the ADP jobs number are derived from actual payroll data. According to ADP, the raw payroll data accounts for about 20% of the total private payroll count.

In Q3, the ADP employment showed a three- month gain of 1.45 million. That's 1 million below the 2.5 million private payroll gains reported for July and August by the Bureau of Labor Statistics (BLS). And the September figures are yet to be released.

The month following the release of the employment data from BLS, ADP usually revises it previously reported job data to be in line with the official stats. Back in June, ADP reported an increase of 2.369 million private-sector jobs. One month later, ADP revised (upward) the June figures to 4.485 million to be more in line with the official stats that showed a gain 4.729 million.

ADP has not offered any reason why the July gain of 216,000 (versus the official figures of 1.481 million) and August gain of 481,000 (versus the official figures 1.027 million) were not re-aligned that has been the normal practice in the past.

The gross federal withheld tax data for July and August were off 15% from year-ago levels. The weakness in tax receipts raised questions over the accuracy of the official figures.

The consensus estimate for September payrolls is a gain of 800,000. That would increase the gap between ADP and private payrolls in Q3 to nearly 2 million. That raises the question are the gains in private payrolls overstated or the ADP gains understated? Tax receipts lean towards ADP figures.

Viewpoint commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
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