Weekly Economic Release Summary: Real Employment Numbers?

Written by Steven Hansen,

This week witnessed the release of the ADP and BLS employment numbers. This month they were somewhat different in detail but the common trend was the continued deceleration of employment growth.

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The goal of the ADP employment report is to “forecast” the BLS nonfarm private employment growth: From ADP:

The data for this report is collected for pay periods that can be interpolated to include the week of the 12th of each month, and processed with statistical methodologies similar to those used by the U.S. Bureau of Labor Statistics to compute employment from its monthly survey of establishments. Due to this processing, this subset is modified to make it indicative of national employment levels; therefore, the resulting employment changes computed for the ADP National Employment Report are not representative of changes in ADP’s total base of U.S. business clients.

If one looks at the total growth for a year, the ADP numbers have been close to the BLS numbers.

The following table shows the exact values from the above graph.

**Compare ADP to BLS Year-over-Year Jobs Growth**
	ADP	BLS	ADP Percent of BLS
2009	-5,068	-5,986	84.66%
2010	-1,237	-889	139.07%
2011	2,037	1,982	102.77%
2012	2,305	2,408	95.72%
2013	2,215	2,272	97.49%
2014	2,544	2,540	100.18%
2015	2,692	2,733	98.51%
2016	2,339	2,318	100.93%
2017	2,134	2,143	99.57%
2018	2,444	2,356	103.71%

However, when one looks at the exact growth each month, there is a significant difference between ADP and the BLS – especially this year.

And the BLS year-over-year deceleration of job growth has been much bigger than ADP this year.

But there is even a bigger discrepancy between the BLS’ two monthly surveys – the household and establishment surveys. The difference (other than methodology and resulting different measurement uncertainties) is that the establishment survey covers only nonfarm employment whilst the establishment includes farm employment in addition (along with many who are self-declared self-employed).

There are lots of numbers out there for employment growth. The question is: are any accurate?

Economic Forecast

The Econintersect Economic Index (October 2019) declined to the lowest level seen since the economic slowdown of 2015/2016. The main reasons for the index decline was the continuous weak industrial production, exports and imports, and government spending for Main Street.

The fundamentals which lead jobs growth are now showing a significant slowing growth trend in the employment growth dynamics. We are currently predicting the jobs growth to be below the growth needed to maintain participation rates and the employment-population ratios at the current levels.

Economic Releases This Past Week

The following table summarizes the more significant economic releases this past week. For more detailed analysis – please visit our landing page which provides links to our complete analyses.

Overall this week:
manufacturing surveys in contraction or showing soft growth
employment soft
construction inflation adjusted growth in contraction
median income improves

**Economic Release Summary For This Week**
Release	Potential Economic Impact	Comment
September ADP Employment	employment slowing	ADP reported non-farm private jobs growth at 135,000 which was within expectations. A quote from the ADP authors: Small businesses have become especially hesitant. If businesses pull back any further, unemployment will begin to rise. This month, ADP’s analysis is that small and medium-sized businesses provided 51 % of the jobs. Manufacturing jobs increased by 2,000. 94 % of the job growth came from the service sector. The August ADP report (last month), which reported job gains of 195,000 was revised to 157,000
August Construction Spending	inflation-adjusted growth in contraction	The headlines say construction improved month-over-month. Our analysis shows the rolling averages improved. Also note that inflation is grabbing hold, and the inflation-adjusted numbers are deep in contraction. Consider this a marginally better report than last month.
August CoreLogic Home Prices	n/a	CoreLogic’s Home Price Index (HPI) shows that home prices rose both year over year and month over month. Home prices increased nationally by 3.6% from August 2018. On a month-over-month basis, prices increased by 0.4% in August 2019.
September Challenger Job Cuts	job cuts high year-to-date	Job cuts announced by U.S.-based employers fell to 41,557 in September, 22.3% lower than the 53,480 announced in August. This is the second-lowest monthly total in 2019. Last month’s total is 24.8% lower than the 55,285 cuts announced in the same month last year. It is the lowest monthly total since April when 40,023 cuts were announced. Despite the drop, so far this year, employers have announced plans to cut 464,869 jobs from their payrolls, 27.9% higher than the 366,058 cuts announced in the same nine months last year. It is the highest January-September total since 2015 when 493,431 cuts were announced.
August Manufacturing	manufacturing slowed	US Census says manufacturing new orders declined month-over-month. Our analysis shows the rolling averages declined, and the rolling average growth is in contraction year-over-year. According to the seasonally adjusted data, it was civilian aircraft that caused the decline in the headline data. The data in this series is noisy so I would rely on the unadjusted 3 month rolling averages which declined and remains in contraction. Remember the headline numbers are not inflation-adjusted.
August Sentier Median Income	economically positive	New data from the monthly Current Population Survey (CPS), indicate that median annual household income in August 2019 was $65,976, up $857 or 1.3 percent from July 2019 ($65,119). The median is now 6.8 percent higher than the median of $61,772 in January 2000, the beginning of this statistical series. The August 2019 median is 3.4 percent higher than that for August 2018, when the median stood at $63,834.
September BLS Employment	soft employment data	The headline seasonally adjusted BLS job growth was near expectations and rather weak. The establishment and household surveys did not correlate. This was a rather poor jobs report. Jobs growth in 2019 continues to be worse than any year since 2010. The trends clearly continue to show a slower growing employment picture. The following chart compares the unadjusted nonfarm private jobs gains this month with the same month historically:
August Trades	soft trade growth	Trade data headlines show the trade balance grew – and both imports and imports grew. The data in this series wobbles and the 3-month rolling averages are the best way to look at this series. The 3-month averages grew for exports and declined for imports. Headlines said Imports of goods were up month-over-month – import goods growth has positive implications historically to the economy. Econintersect analysis shows unadjusted goods (not including services) growth decelerated 3.9 % month-over-month (unadjusted data) – down 3.0 % year-over-year (down 1.0 % year-over-year inflation-adjusted). The rate of growth 3-month trend is accelerating (rate of change of growth declined). Headlines said Exports of goods were up month-over-month, and Econintersect analysis shows unadjusted goods exports growth decelerated (not including services) 0.4 % month-over-month – down 0.8 % year-over-year (up 0.7 % year-over-year inflation-adjusted). The 3-month rate of growth trend is accelerating.
Surveys	manufacturing surveys showing soft growth or in contraction – services growth very weak	Chicago PMI – The Chicago Business Barometer fell 3.3 points to 47.1 in September, following August’s rebound to 50.4. Business confidence dropped below the 50-mark to 47.3 in Q3, leaving the index at the lowest level on a quarterly basis since Q3 2009. Dallas Fed Manufacturing – This survey remains in positive territory year-over-year with subindices new orders declining (but in expansion) and unfilled orders declining but remaining in contraction. This should be considered a worse report than last month. Markit and ISM Manufacturing – The ISM Manufacturing survey declined and remains in contraction for the first time in three years. The key internals were in contraction. The Markit PMI manufacturing Index remained barely in positive territory and insignificantly improved. Based on these surveys and the district Federal Reserve Surveys, one would expect the Fed’s Industrial Production index growth rate to be around the same level of growth as last month. Overall, surveys do not have a high correlation to the movement of industrial production (manufacturing) since the Great Recession. The ISM and Markit manufacturing surveys were similar this month. ISM and Markit Services – The ISM non-manufacturing (aka ISM Services) index and the Markit PMI Services Index continued their growth cycle but show very little growth.
Rail Movements	Definitely not positive news	Rail so far in 2019 has changed from a reflection of a strong economic engine to contraction. Currently, not only are the economic intuitive components of rail in contraction, but the year-to-date has slipped into contraction.