ADP Sets Soft Trend for Friday's Payroll Report From the Labor Department

Jon C. Ogg

Each month’s ADP employment report gets to act as a preview and bias-setting event for the U.S. Department of Labor’s report on payrolls and national unemployment. The numbers are never expected to be exact by any means, but a very positive or very negative ADP report will set expectations for a more robust or weaker official payrolls report.

ADP reported that the small business sector lost 23,000 jobs in June, but the net in ADP’s monthly nonfarm payrolls was up 102,000 for the month. That was after factoring in a gain of 60,000 jobs in the mid-sized businesses (50 to 499 employees) and a gain of 65,000 in the large business sector (500 or more employees).

Dow Jones had forecast that the total ADP payrolls would rise by 140,000 in June. Econoday had a consensus estimate for 140,000 payrolls gains as well.

The May total of jobs added was revised up from 27,000 to 41,000.

ADP also showed that the goods-producing sector lost 15,000 jobs in June. Of the goods-producing jobs, there was a gain of 7,000 manufacturing jobs that was negated and taken into the red by natural resources and mining and by construction.

The services-providing sector added 117,000 payrolls in June. After backing out a loss of 3,000 jobs in information and a gain of 3,000 in the leisure and hospitality sector, these were the main services payrolls added by sector for June:

  • 23,000 higher for trade, transportation and utilities
  • 7,000 higher for financial activities
  • 32,000 higher for professional and business
  • 55,000 higher for education and health

ADP and Moody’s co-produce the report each month. ADP’s Ahu Yildirmaz said:

Job growth started to show signs of a slowdown. While large businesses continue to do well, small businesses are struggling as they compete with the ongoing tight labor market. The goods producing sector continues to show weakness. Among services, leisure and hospitality’s weakness could be a reflection of consumer confidence.

Mark Zandi of Moody’s said:

The job market continues to throttle back. Job growth has slowed sharply in recent months, as businesses have turned more cautious in their hiring. Small businesses are the most nervous, especially in the construction sector and at bricks-and-mortar retailers.

Each month’s ADP report is derived from ADP’s actual payroll data, and it measures the change in total nonfarm private employment each month on a seasonally adjusted basis. That payroll data is taken from 411,000 U.S. clients employing nearly 24 million workers in the United States.

The government’s official unemployment and payrolls data from the Labor Department is due at 8:30 a.m. Eastern Time on Friday, July 5. The Dow Jones (Wall Street Journal) consensus estimates were last seen as follows:

  • Unemployment exp. flat at 3.6%
  • Average hourly earnings up 3.2% annually
  • Nonfarm payrolls expected to be up 165,000 (after just 75,000 in May)