If the ADP report provides any kind of indicator, the June jobs report due out tomorrow will probably not look much better than the last few months — when ADP overshot job growth. According to today’s projections from ADP client activity, the US economy added only 158,000 jobs, barely enough to keep pace with population growth. That’s well off of last month’s 230,000-jobs-added pace, which turned out to overshoot the BLS number by almost 100,000:
Private sector employment increased by 158,000 jobs from May to June according to the June ADP National Employment Report® . Broadly distributed to the public each month, free of charge, the ADP National Employment Report is produced by the ADP Research Institute® 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.
That’s a miss on expectations, which are always tricky when it comes to ADP data. According to USA Today, economists had predicted that ADP would show 183,000 jobs added. They also predict a BLS figure of 177,000 jobs added, neither of which would have been spectacular either, but still a bit better than ADP suggests today.
The problem this year is not just that ADP has not been a reliable leading indicator, but that they have again begun to consistently overshoot reality. A few years ago, ADP brought on Mark Zandi to correct that trend, and it seemed to have some impact, even though ADP longer-term trends still remained much more reliable than its month-to-month projections. USA Today’s Paul Davidson notes the same issue, writing that “ADP generally captures the same broad trends as Labor but has not been a reliable predictor of that closely watched survey recently.”
This doesn’t bode well for tomorrow’s report. If it comes in well under the ADP figures, it will be the third disappointing month out of the last four. Even if the BLS report number manages to make it to the ADP number, it’s still a little above maintenance, and no indication of a coming explosion of job creation or economic growth.
Speaking of Zandi, he appeared on CNBC to call this a “solid number,” but bear in mind that he also predicted a “rip roaring” result from BLS in May, too. Wage and price pressures are “just down the road,” Zandi assures viewers, maybe a year from now. We’ve been hearing that for quite a while now, but … trust him.