Wednesday, October 6, 2010

ADP National Employment Report shows slowing economy

ADP has released its analysis for the month of September, and the news is not good.  Consensus forecasts were for anywhere from a zero gain to a slight increase (around 10,000), which economists believe would be cancelled out by the release of temporary Census workers.


Private-sector employment decreased by 39,000 from August to September on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The estimated change of employment from July to August was revised up from the previously reported decline of 10,000 to an increase of 10,000.

The decline in private employment in September confirms a pause in the economic recovery already evident in other data. A deceleration of employment occurred in all the major sectors shown in The ADP Report and for all sizes of payroll. The September decline in employment followed seven monthly increases from February through August. However, over those seven months, the average monthly gain in employment was 34,000. There simply is no momentum in employment.

Unlike the estimate of total establishment employment to be released on Friday by the Bureau of Labor Statistics (BLS), today’s ADP National Employment Report does not include the effects of federal hiring — and now firing — for the 2010 Census. Hiring for the census peaked in May and is still tapering down slightly.

This means that if the Census did indeed lay off the several thousands expected, then Friday’s Bureau of Labor Statistics report could be very bad news.  If private sector employers didn’t add jobs in September—and the ADP figures indicate that they didn’t—then expect the Friday figures to be “unexpected.”

Whether or not ADP’s figures presage the flavor of Friday’s BLS report, the data clearly show that the economy is not gaining strength and will struggle to stay above zero net growth in Q4 2010 and Q1 2011.  Q4 is the strongest quarter of the year for retail sales, and if people are concerned about job security and employment prospects, a dismal holiday shopping season is in store.

ADP is a company that handles payroll management for companies across the United States.