ADP’s brand-new paradigm for predicting job growth in the private sector got off to a somewhat rocky start this morning; their site crashed after the release for a brief period. Their new report, using Moody Analytics, is intended to close the running gap between their projections and the BLS report from the Establishment Survey. Today’s report with the new processes predicts that the US economy added 158,000 jobs in October, above analyst projections but still not a robust rate of growth:
Private sector employment increased by 158,000 jobs from September to October, according to the October ADP National Employment Report®, which is produced by Automatic Data Processing, Inc. (ADP®), a leading provider of human capital management solutions, in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
Generally speaking, the economy has to add 125,000 jobs each month just to keep up with population growth. This would make October a slightly positive month — if the new processes from Moody Analytics has corrected the chronic overshoot at ADP. Normally, I’d take 60% of the ADP figure and project the BLS number from that. Under that plan, I’d guess that we’re looking at somewhere around 100,000 jobs added in tomorrow’s official report, which would be slightly under the minimum growth necessary.
In other news, the Department of Labor reported a slight decline in new jobless claims last week, but nothing outside of the ordinary:
In the week ending October 27, the advance figure for seasonally adjusted initial claims was 363,000, a decrease of 9,000 from the previous week’s revised figure of 372,000. The 4-week moving average was 367,250, a decrease of 1,500 from the previous week’s revised average of 368,750.
The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending October 20, unchanged from the prior week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending October 20 was 3,263,000, an increase of 4,000 from the preceding week’s revised level of 3,259,000. The 4-week moving average was 3,266,500, a decrease of 6,250 from the preceding week’s revised average of 3,272,750.
The decline in this case isn’t statistically significant. We have operated in a range from 360K-380K since the spring of 2011. The four-week average still lands squarely in that range, as does this week’s level, even without the now-obligatory upward adjustment the next week. While this data isn’t a direct correlation to job growth, as a series it does correlate, at least indirectly, to the health of job creation in the economy. That health hasn’t changed much over the last 18 months.
CNBC seems excited by the news, though:
The private sector created a better-than-expected 158,000 jobs in October, while jobless claims edged lower and productivity rose about as much as expected.
A day after the firm sharply lowered its original count for September, ADP and Macroeconomic Advisors, working now with Moody’s Analytics, said the service sector once again had a big month for job creation.
Services comprised most of the October total, ringing up 144,000 jobs while the goods-producing sector made up the balance at 14,000.
They also note that ADP still hasn’t quite fine-tuned its changes:
The ADP changeover in the way it was handling its monthly job count created a stir Wednesday when the firm said the original 162,000 new positions reported for September actually came down to 88,200 under the new methodology. …
That number was changed again Thursday, revised mildly upward to 114,000, close to the government’s number for the same month.
What does this mean for tomorrow’s BLS report? I would expect the Establishment Survey to report something close to September’s level of job growth, perhaps as high as 120,000 new jobs. However, I would also expect that outlier from the Household Survey last month to correct itself in this report, which would push the jobless rate higher. I’ll guess 8.0% for that part of tomorrow’s report.
What do you think tomorrow’s jobs-added number will be? Take the poll: