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Economy in Brief

ADP Report: Indicates Slight Reversal In U.S. Private-Sector Job Recovery
by Tom Moeller September 1, 2010

Following six consecutive months of modest recovery, the payroll processor ADP, in their latest National Employment Report, indicated that private nonfarm payroll levels fell slightly during August. The 10,000 worker decline followed six consecutive months of increase and a downwardly revised 37,000 July rise. It also disappointed Consensus expectations for a 15,000 gain.

The U.S. Bureau of Labor Statistics will report August payroll employment on Friday. Economists expect a 100,000 worker decline due to the layoff of temporary Census workers. Private sector jobs are expected to rise a minimal 28,000. For comparison, the July increase of 37,000 in ADP's measure of private nonfarm payrolls was accompanied by a 71,000 rise in the BLS measure of private sector jobs. 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 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.

A deeper 40,000 decline (-3.8% y/y) in goods producing employment accounted for part of the August jobs disappointment. Payrolls have been falling since early-2006 but the rate of decline has slowed substantially. At the worst, goods producing employment fell 334,000 during February of last year. In the manufacturing sector alone payrolls slipped 6,000 (-1.3% y/y). Goods producing small payrolls fell 21,000 (-5.3% y/y) while medium-sized payrolls fell 12,000 (-2.6% y/y). Large-sized payrolls ticked down 7,000 (-3.8% y/y). Construction employment fell 33,000. The greatest monthly drop of 120,000 was logged during March of 2009. Financial activities jobs fell 5,000, still near the smallest decline since June 2007.

ADP reported that private service-producing industry employment rose for the seventh consecutive month. However, the 30,000 August rise (0.1% y/y) was the smallest of the period. Small-sized payrolls grew 15,000 m/m (0.3% y/y) while medium-sized payrolls ticked up just 7,000 (0.2% y/y). Large service-producing payrolls rose a steady 8,000 (-0.4% 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. The full ADP National Employment Report can be found here and the ADP methodology is explained here.

ADP National Employment Report August July June Y/Y 2009 2008 2007
Total Nonfarm Private Payroll Employment (m/m Chg., 000s) -10 37 19 -0.5% -4.9% -0.7% 1.1%
     Small Payroll (1-49) -6 20 2 -0.5 -4.1 -0.1 1.8
     Medium Payroll (50-499) -5 21 15 -0.3 -5.7 -0.9 1.0
     Large Payroll (>500) 1 -4 2 -1.1 -5.6 -1.8 -0.2
 Goods Producing -40 -30 -16 -3.8 -12.3 -3.7 -1.1
     Manufacturing -6 -11 15 -1.3 -11.1 -3.0 -1.7
 Service Producing 30 67 35 0.1 -3.3 0.0 1.7
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