ADP Nonfarm Employment Change as Expected

Alan Penny

30 October 2019

3 min read

many US flags in a field

  • ADP comes in at 125,000 as expected
  • Estimated change in the number of employed people by private company
  • Sets up jobs figure on Friday

The Automatic Data Processing employment figures have come out during the trading session on Wednesday, as expected. ADP is one of the largest data collection services when it comes to payrolls in the United States. This announcement, which comes out a couple of days ahead of the Bureau of Labor Statistics Nonfarm Payroll numbers, is thought of as a harbinger of what the jobs report may show. That being said, it isn’t exactly a one-for-one type of correlation, but it does show trends.

Quite often, ADP will show whether or not the number will be higher or lower, based on how it comes in in relation to the expected figure.

What the number means

The ADP can only be taken as a trend indicator more than anything else. This is mainly because the number is taken by a private company that processes payroll in the United States, not the heavy bureaucracy that is the Bureau of Labor Statistics. Quite frankly, revisions tend to be less drastic, but they do happen in this estimation as well. For instance, the revised numbers from the month of September were brought down from 135,000 jobs added to just 93,000 added.

we will probably see the jobs number on Friday come in roughly on mark

What this suggests is that we will probably see the jobs number on Friday come in roughly on mark, which is expected to be 90,000 jobs added during the month of September. While the numbers show a difference of 35,000, it should be kept in mind that the government does a lot of estimating in its figures that later get revised. This release by ADP also suggests that the previous addition of 136,000 jobs may be brought down a bit as well, although revisions tend to have less influence on what happens with the markets.

The fact that the ADP number is right on the money suggests that, perhaps, the jobs figure may be a bit of a non-event on Friday. That may be articulated even further, depending on what happens with the FOMC Statement during the Wednesday session.

Markets only have so much energy to expend in any given week under most circumstances, so it’s possible that Friday will be somewhat quiet. However, one of the things that do tend to move the markets drastically is when the BLS never comes in much farther away from estimated figures than what the ADP number suggests. This is because quants will model their trading based on what ADP tells them is heading into the jobs figure.

All things being equal, it does look like Friday could be a bit of an anti-climactic session. But it’s also possible that if it misses far enough, it could throw things into chaos yet again. Recently, the United States has been seeing slowing employment growth, but it should also be noted that it is at historically high employment rates. In other words, one of the biggest problems is that there are fewer workers to go around in order to fill jobs. This leads to somewhat misleading lower top-line figures.

Written By
Alan Penny

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