ADP employment report shows slowdown

The employment data has always been one of the key macroeconomic variables to look at for bond and equity markets, but it has been subject to revisions and changes in seasonality which makes it a difficult number to assess. Markets will react immediately to the number based on the surprise or unanticipated portion of the announcement, but a closer look will often suggest that the markets have over reacted to the news. Other alternative employment numbers would be helpful. The ADP National employment Report is now an alternative that gives us a peek at what is happening to the labor and growth picture.

See http://www.adpemploymentreport.com/.

“The ADP report is a measure of nonfarm private employment, based on a subset of aggregated and anonymous payroll data that represents approximately 383,000 of ADP's 500,000 U.S. business clients and roughly 23 million employees working in all 19 of the major North American Industrial Classification (NAICS) private industrial sectors. The ADP National Employment Report was developed to help meet the need for additional timely and accurate estimates of short-term movements in the national labor market among economists, financial professionals, and government policy-makers. Because ADP pays 1-in-6 private sector employees in the United States every pay period across a broad range of industries, firm sizes, and geographies, it has a unique and significant perspective on the U.S. labor market.”

The ADP numbers will be noisy over the short-run, but using simple moving averages shows that there is a slowdown in employment. The twelve month moving average of changes peaked over a year ago. This indicator may not have slowed enough to suggest that equities should continue in a free fall, but this employment growth is below where we were at the beginning of the year. Growth will not counterbalance the credit fears in the market.