ADP Payrolls Gain May Boost Labor Department Expectations -- With a Caveat

Each and every month, the U.S. Department of Labor’s payrolls and unemployment rate report is effectively previewed by ADP’s monthly private sector payrolls report. These reports are not unilaterally mirror images of each other, but what ADP generally can do is offer a directional bias for investors and economists when it comes to private sector payrolls gains.

ADP released data on Wednesday showing that private sector employment increased by 216,000 payrolls in November over October. The November ADP National Employment Report is derived from ADP’s actual payroll data each month and measures the change in total nonfarm private employment on a seasonally adjusted basis.

One issue that may matter here is that October’s figure was revised lower by 28,000 jobs (from 147,000 to 119,000). Bloomberg’s 160,000 consensus for November ended up with an official estimate that was 56,000 higher than consensus — but then it is just 28,000 if you take the prior month’s revision into consideration for a net basis.

All in all, the sum of this report should be generally positive for Friday’s Labor Department report on payrolls. That being said, the bias should be mildly more positive than massively higher due to the prior month’s big revision lower.

Of the categories, small businesses (one to 49 employees) added 37,000 jobs and medium-sized businesses (50 to 499 employees) added 89,000 jobs in November. Large businesses (500 or more employees) added 90,000 payrolls.

The goods-producing jobs were a drag at −11,000 in November, even though construction saw 2,000 jobs added. The drop of 4,000 in natural resources and mining and a drop of 10,000 in manufacturing made up the difference.

In the services sector, this was 228,000 new payrolls in November. This larger figure was broken down as follows:

  • Trade/transportation/utilities, 69,000
  • Information, −10,000
  • Financial activities, 12,000
  • Professional/business services, 68,000
  • Education/health services, 43,000
  • Leisure/hospitality, 38,000
  • Other services, 8,000

The big question is whether the ADP report really will sway economist expectations ahead of Friday’s Labor Department report due at 8:30 a.m. on Friday. Bloomberg has the following consensus estimates for November:

  • Nonfarm payrolls, +170,000 (161,000 prior)
  • Private sector payrolls, +155,000 (142,000 prior)
  • Unemployment, 4.9% (flat versus prior)
  • Average hourly earnings, +0.2% (+0.4% prior)