Economy

ADP Strength Aims to Form Solid Base for Friday's Payrolls and Unemployment

Jon C. Ogg

Published: March 2, 2016 8:55 am

Last Updated: January 13, 2020 12:29 pm

If there is one driving force of the economy behind gross domestic product, it is the jobs market. In fact, you can’t really have strong GDP without a strong labor market. This is why economists use the ADP payrolls number as a precursor for each month’s nonfarm and private sector payrolls report from the U.S. Department of Labor.

If ADP is right, the payrolls growth may be a tad better than expected this Friday. ADP said that total private sector employment rose by 214,000 in February. The prior month was revised to 193,000 from 205,000, and the consensus from Bloomberg for February was 185,000 (with a range of 165,000 to 205,000).

It should be noted that the ADP data does not always true-up with the Bureau of Labor Statistics (BLS) data each month. That being said, it is frequently treated as a preview for a directional basis.

Bloomberg shows that the consensus estimates for the BLS payrolls report due in 48 hours is 190,000 in nonfarm payrolls and 183,000 in private sector payrolls.

This stronger than expected ADP report might not be so much higher than estimates that it will move the needle much. That being said, it should act as an underpinning for a better trend than the mere 151,000 in nonfarm payrolls gains in January (and only 158,000 private sector).

If you break down ADP’s business size, it showed the following:

• Small businesses added 76,000 jobs.
• Medium-sized businesses added 62,000 jobs.
• Large businesses added 76,000 jobs.

On a sector by sector view, ADP showed that goods-producing companies were 5,000 added while services added 208,000 jobs. This was broken down as follows:

• Construction, 27,000
• Manufacturing, -9,000
• Trade/transportation/utilities, 20,000
• Financial activities, 8,000
• Professional/business services, 59,000