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How do ADP's monthly unemployment reports stack up against the government's?

Payroll giant Automatic Data Processing Inc. ( ADP ) released on Wednesday its monthly assessment of the U.S. labor economy , estimating that private- sector employment climbed by 206,000. The report often moves the markets, but how accurate is it?

It is important to note the different strategies used by both ADP and the Bureau of Labor Statistics, which releases official jobs data on the first Friday of every month. Moreover, while ADP forecasts only private sector job growth, the BLS reports on employment in both the public and private sector.

The BLS uses data culled from its Current Population Survey - a random sample of roughly 60,000 households - to ascertain national unemployment levels. ADP, on the other hand, estimates monthly unemployment by gleaning information from payrolls it processes for 430,000 companies. In total, the New Jersey -based firm collects data on more than 23 million people who work in all major industries and states.

In its July report, ADP stated private sector employment climbed by 114,000 from June, while the BLS said it actually increased by 154,000. The government later upwardly revised that figure to 173,000. In August, during which thousands of Verizon workers went on strike, ADP said private companies added 91,000 workers to their payrolls. The BLS initially pegged the number at 17,000.

In September, ADP said private companies added 91,000 jobs, which was well below the BLS' original 137,000 approximation. Its October report , conversely, proved prescient. ADP said private firms added 110,000 in the month, just slightly higher than the government's 104,000 figure.

ADP provides a useful assessment of private sector employment, but its data - though certainly vast - is not collected from a random sample. Investors afford the ADP gauge significant clout, but perhaps they should not.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.