Private payroll-processing giant ADP estimates job growth outside of the public sector every month, usually a day or two before the Bureau of Labor Statistics issues the unemployment estimate for the previous month. For the first time in six months, ADP reports a net loss of jobs, estimating that the US has 10,000 fewer private-sector jobs than in July. They also predict that BLS, which has to account for the dismissal of Census Bureau employees, will issue a report that looks even worse:
Private sector employment decreased by 10,000 from July to August on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The estimated change of employment from June to July was revised down slightly, from the previously reported increase of 42,000 to an increase of 37,000.
The decline in private employment in August confirms a pause in the recovery already evident in other economic data. The deceleration in employment was evident in the major sectors and by size of business. This month’s decline in employment followed six monthly increases from February through July. Over those six months the average monthly gain in employment was 37,000 with no evidence of acceleration.
Unlike the estimate of total establishment employment to be released on Friday by the Bureau of Labor Statistics (BLS), today’s figure does not include the effects of federal hiring — and now firing — for the 2010 Census. Hiring for the census peaked in May. For this reason, Friday’s figure for the change in nonfarm total employment reported by the BLS might be weaker than today’s estimate for nonfarm private employment in the ADP National Employment Report.
Augusts’ ADP Report estimates nonfarm private employment in the service-providing sector rose by 30,000, the seventh consecutive monthly gain. This increase was not enough to offset an employment decline in the goods-producing sector of 40,000. Employment in the manufacturing sector decreased 6,000, the second consecutive monthly decline.
Reuters, of course, didn’t see this coming and used their favorite adverb. They also see bad news coming on Friday:
The U.S. manufacturing sector grew faster than expected in August but private employers unexpectedly cut jobs, showing the economic recovery still faces major headwinds. …
The government is expected to report on Friday that nonfarm payrolls dropped 100,000 in August, the third straight month of job declines, while private sector employment increased only 41,000, according to a Reuters survey.
ADP isn’t a perfect bellwether, but they’re usually in the ballpark. The reversal in direction in their report could mean a net loss of private jobs overall, or just a further slowing of net growth in the private sector, as Reuters supposes. One has to remember that net job growth has to surpass 100,000 a month to keep up with population growth, too, so the term “net” is somewhat misleading. Every month that the economy fails to meet that level means more people unemployed or underemployed, and so far over the last two years, we have had only one month of private-sector growth at or above that level (March 2010).
Given Reuters’ track record on predictions, I suspect we’ll see the use of the word “unexpectedly” again on Friday.