ADP Revised its Jobs Forecast Methodology, What’s Cookin’ in August?

Change in Private Payrolls Discussion

• For July, the ADP says private payrolls expanded by 268,000. The BLS says 471,000. 
• For August, the ADP says private payrolls expanded by 132,000. The BLS reports on Friday

ADP^® National Employment Report

Please consider the ADP^® National Employment Report for August, 2022.

• Job growth slowed for second-straight month in August
• Private employers created 132,000 jobs in August, a step down from the month before, when the economy created nearly 270,000 jobs. 
• Payroll growth also slowed in July when compared to June of this year.

Change by Firm Size 

Comparing ADP NER and the BLS monthly employment report

• ADP and BLS both report on jobs (an employee-employer relation), not employed persons; a person may have more than one job.
• ADP produces a weekly-frequency data series for jobs in each week, while BLS produces a monthly-frequency data series for jobs in the week that includes the 12th of the month.

Methodology Change 

• The new National Employment Report presents independent measures of the U.S. labor market rather than a forecast of the Bureau of Labor Statistics (BLS) monthly jobs report. 
• The new measures leverage the jobs and wage data of 26 million workers to provide a representative picture of the U.S. labor market that will complement official government data.
• The new ADP National Employment Report provides high-frequency measures of employment, including jobs and wages, to provide a clearer, near real-time assessment of the labor market that can inform business leaders, researchers, and policymakers.
• The NER uses ADP payroll data to provide a nationally representative measure of employment. This new approach differs from the former NER’s model-based methodology, which sought to forecast changes in the Current Employment Statistics monthly survey conducted by the Bureau of Labor Statistics. 
• Job data from 2010 forward will be constructed using the new methodology.

Importantly, the new measure is an independent indicator and complementary to government data. It no longer tries to forecast the BLS report.

The new report is via a partnership with Stanford University’s Stanford Digital Economy Lab.

BLS QCEW

• The Quarterly Census of Employment and Wages (QCEW) provides a quarterly count of Paid Employment reported by employers covering more than 95 percent of U.S. jobs. It is the benchmark measure of employment in the U.S., but it is reported with a lag of about five months after the end of the quarter.
• The purpose of the ADP NER is to produce a more timely measure of U.S. employment than the QCEW measure of near universe U.S. employment.
• To produce a nationally representative measure of employment, we use QCEW data on the national distribution of employment across industries, U.S. states, and business establishment employment size categories to weight the weekly employment growth of establishments in the ADP weekly matched sample.

ADP vs BLS Since 2010

ADP vs BLS Detail Since 2021

I have a question into ADP as to the wide and perhaps increasing discrepancy between ADP and BLS. 

The ADP change is welcome. 

However, I would also like them to separately weed out duplicate social security numbers to get a better handle on the number of people working multiple jobs and for comparison to the BLS household survey.

The latter has gone haywire.

Nonfarm Payrolls and Employment Level

Synopsis Since March

• Employment -168,000
• Jobs +1,680,000

The household numbers are admittedly noisy, but a five month divergence now stands out.

In expanding economies, discrepancies tend to resolve higher. At turns, discrepancies tend to resolver lower.

I suspect labor turnover and retirements have seriously distorted payrolls and at least some of this strength will be taken away.

ADP can easily help resolve this by weeding out duplicate Social Security numbers. 

This post originated at MishTalk.Com.

Thanks for Tuning In!

Please Subscribe to MishTalk Email Alerts.

Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.

If you have subscribed and do not get email alerts, please check your spam folder.

Mish