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ADP Employment Report: An Overview on Reading it


Release Date: 1st Friday of each Month
Release Time: 8:15am ET
(For monthly ADP reports)

The ADP Employment Report is an extrapolation from what ADP describes as a representative cross section of its approximately 24 million employee clients. ADP is in a good position to generate this report because it provides taxation, payroll, and many other services to over 400,000 business clients. The ADP Employment Report comes out two days before the Bureau of Labor Statistics’ monthly employment report, which is usually broadcast on the first Friday of the month. Release time is 8:15 AM ET. The ADP report is significantly less important with regard to moving markets than the BLS report, which, along with reports of interest rate changes by the Federal Reserve, constitute the most powerful scheduled reports followed by market participants.

The ADP report in its current format reflects an agreement with Moody’s Analytics according to which ADP produces a report that contains data that help  market participants to predict the BLS report  published the following Friday. The ADP report differs from the BLS report in a number of ways. First, the ADP report only concerns private payroll data, in part because government employers do not seem to use ADP services on a wide scale. Second, the ADP report is extrapolating from a fraction of a fraction of the U.S. labor force, whereas the BLS report processes considerably more data in issuing its report.

Given their two different methodologies, it shouldn’t be surprising that the two reports often diverge substantially. [Here, we have a chart but I need to check out the copyright details.] Various market commentators have noticed patterns in the ADP report. UBS, for instance, has remarked that the ADP report is less weather sensitive that the BLS report (cnbc.com, 3/4/2015). And CNBC commentator Steve Liesman has said that some economists routinely add 5,000 or 10,000 to the ADP number to arrive at a prediction for the BLS number.

Over the years the ADP report has become increasingly more data-rich. The headline number is ADP’s estimate of the change in U.S. nonfarm private sector employment. Many market participants pay attention to this number alone. However, the monthly ADP report breaks down the data to list estimates for hiring increases in small, medium, and large companies. It also describes gains in “goods-producing” and “service-providing” sectors, and includes further details within these subsections. ADP also generates a detailed small business report with numerous bar charts. Moreover there is a detailed “National Franchise Report” and a monthly “Regional Report,” which breaks data down into the various regions of the U.S.

More recently, ADP has added a chapter of its report entitled the “ADP Workforce Vitality,” which is a more in-depth and nuanced picture of the U.S. labor situation. This addition has met with critical acclaim among many market professionals, who appreciate its vast font of data and its role as a supplement to the BLS report. Included in this chapter is ADP’s “Workforce Index,” which serves as a comprehensive assessment of the American workers’ earnings in the present and recent past. This index is an amalgam of metrics including job holders’ wages, hours worked, job switchers’ wages, and total employment. This figure is represented graphically with 3Q, 2013 designated 100. At the end of 1Q, 2015 the index read 105.7, or a 5.7% improvement over 3Q, 2013. This data is NOT seasonally adjusted. Because of their access to such great quantities of in-depth data, ADP can report such details as [Y/Y] “Wage Growth for Workers Who Stayed in Jobs: 1.9%” and [Y/Y] “Wage Growth for Workers Who Changed Jobs: 2.7%.” This also chapter contains numerous other articles and charts that illustrate aspects of the labor situation that can be found nowhere else.

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