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Economy in Brief

ADP Report: Payroll Employment Decline Continues To Shrink
by Tom Moeller February 3, 2010

There's no gain in payroll levels yet, but the shrinkage continued to lessen last month. The latest report from the payroll processor ADP, in their National Employment Report, indicated that January nonfarm payroll levels declined 22,000 following a revised 61,000 December drop that was less than initially reported. The latest reading was the twenty-fourth consecutive monthly decline.

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 January payroll employment this Friday. For comparison, the December decline of 61,000 in ADP's measure of private nonfarm payrolls was accompanied by a similar loss of 64,000 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 38,000 (-2.0% y/y). Small-sized payrolls grew 16,000 (-1.7% y/y) while medium-sized payrolls grew a larger 22,000 (-2.2% y/y). These increases were accompanied by no-change (-2.3% y/y) in large service producing payrolls.

In the goods producing sector employment fell another 60,000 during January (-10.9% y/y). The three-month annual rate of decline eased again to -4.8% versus -17.3% at its worst last March. Small-sized payrolls fell 28,000 (-11.1% y/y) while medium-sized payrolls fell 13,000 (-10.3% y/y). Large payrolls fell 19,000 (-11.9% y/y). In the manufacturing sector alone, payrolls fell 25,000 (-9.8% y/y). That was the easiest m/m decline in two years and the three-month change moderated to -3.5% from -17.4% last March.

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 January December November Y/Y 2009 2008 2007
Total Nonfarm Private Payroll Employment (m/m Chg., 000s) -22 -61 -121 -3.6% -4.4% -0.5% 1.2%
   Small Payroll (1-49) -12 -17 -50 -3.1 -3.7 -0.0 1.6
   Medium Payroll (50-499) 9 -16 -37 -3.8 -5.0 -0.5 1.2
   Large Payroll (>500) -19 -28 -34 -4.4 -5.1 -1.6 -0.1
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