Economy

ADP Payrolls Disappointment Likely to Dampen Labor Department Payrolls Expectations

Jon C. Ogg

Published: May 4, 2016 10:15 am

Last Updated: January 13, 2020 9:53 am

If there is one economic report that is used each month as a barometer for the direction of the payrolls and unemployment report from the U.S. Department of Labor, it is the ADP payrolls report that comes out 48 hours earlier each time. This number was weak enough that it is likely to drive down expectations for the Labor Department’s payrolls report this Friday.

ADP said that private sector payrolls rose by a mere 156,000 in the month of April. Wednesday’s ADP National Employment Report is derived from ADP’s actual customer payroll data and tracks the monthly changes in total nonfarm private employment (payrolls) each month on a seasonally adjusted basis.

Dow Jones had its consensus estimate at 196,000 for April, while Bloomberg had the consensus estimate at 193,000. Bloomberg also had its Econoday range at 165,000 on the low-end and 210,000 on the high-end. Being under all estimates, and that far under, the consensus, is why this is likely to lower the consensus for the Labor Department private sector and nonfarm payrolls Friday.

Wednesday’s breakdown in the jobs being added was 93,000 for small businesses, 39,000 for the medium-sized businesses and 24,000 for the large ones.

Bad news is here for manufacturing jobs in America. Goods-producing payrolls actually declined by 11,000 in April. All the gain was in the services sector, with a gain of 166,000. The industry snapshot that was provided by ADP as follows:

• Construction, 14,000
• Manufacturing, −13,000
• Trade/transportation/utilities, 25,000
• Financial activities, 4,000
• Professional/business services, 27,000

As far as what to expect from the Bureau of Labor Statistics on Friday, Bloomberg has the consensus estimates for April at 200,000 in nonfarm payrolls and 195,000 in the private sector payrolls. The preliminary March reports were 215,000 in nonfarm payrolls and 195,000 in private sector payrolls. Unemployment is expected to drop to 4.9% from 5.0%. Again, these expectations are likely to tick down after the ADP report.

Ahu Yildirmaz, vice president and head of the ADP Research Institute, said:

Despite the softest overall monthly jobs added in three years, small businesses remained an engine for job growth in April. Smaller businesses are less susceptible to global conditions, such as low commodity prices and the strong dollar, that may have caused larger businesses to ease up on hiring.

Mark Zandi, chief economist of Moody’s Analytics, said:

The job market appears to have stumbled in April.  Job growth noticeably slowed, with some weakness across most sectors. One month does not make a trend, but this bears close watching as the financial market turmoil earlier in the year may have done some damage to business hiring.