ADP Reaches +132K Under New System; Pre-Markets Up

Wednesday, August 31, 2022

A new private-sector payroll report from Automatic Data Processing ADP is out this morning — the first of these all summer, due to a recalibration of its employment tracking — and results, while difficult to compare until we get used to this new system, are far lower than expectations. A total of 132K missed the consensus around 300K, and is the second-straight lower month from June’s 380K.

Clearly, we’re off the Great Reopening cycle, and have been since March of this year, at least in terms of private-sector employment. By sector, August was led by Leisure/Hospitality at +96K, and Trade/Transportation/Utilities reached +54K. Manufacturing was unchanged month over month, while Professional/Business Services lost -14K positions and Education/Healthcare fell -15K. These latter two segments routinely lead new monthly hires; this development may be providing a new wrinkle in how we look at employment reports going forward.

That said, the new ADP system is now completely independent of the Bureau of Labor Statistics (BLS), which provides its non-farm payroll report Friday morning. Without delving into the technicals, the ADP jobs report for this month and going forward provides a different picture of the same labor force landscape.

One new feature comes in the form of Job Stayers versus Job Changers, and how much their pay is augmented year over year. In August, Job Stayers saw their wages increase on average +7.6%, while Job Changers grew their employment income +16.1%. This will be an interesting metric to follow over time; wage growth is one of the main columns we look at when seeing whether high inflation is being supported. Thus, from a standing start, these numbers look a little “sticky,” inflation-wise.

Pre-market futures like this jobs report, actually. Bouncing from flat to up low-triple digits on the Dow and Nasdaq is perhaps a reflection of lower private-sector employment “bad news” being interpreted as “good news;” the Fed, as we know, is keeping a close eye on employment as it formulates its decision how high to raise interest rates a few weeks from now and beyond.

Tomorrow morning we'll again see weekly jobless claims, which look to be plateauing around 240-250K -- a rather Goldilocks range, considering interest rate hikes and what they tend to mean for employment. Then, on Friday, the big BLS report will give us the clearest view yet of labor force metrics as the summer winds to a close. Expectations are for around 320K new jobs created this month -- a healthy figure, but well off the 500K+ pace we saw in July.

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