ADP Jobs Report Pinpoints the Weakness is Goods Production

From various data points including transport indexes and industrial production, we see goods production increasing.

The ADP National Employment Report Issued for August 2010 shows a contraction of private non-farm private payroll jobs declined 10,000 MoM (seasonally adjusted).

The reason for this decline is obvious from the chart below which shows a larger than anticipated drop in goods production across every size of business.

Because of superior methodology, I trust the ADP data more than the jobs report produced by BLS. However, ADP does not report on government payrolls, and there are certain elements of the BLS data which deserves analysis.

This ADP report employment declines needs to be squared with the August 2010 Challenger Job Cut report which shows job cuts are at 10 year lows. Their statement in part:

Every other job-market indicator seems to be stuck in first gear. In contrast, the layoff picture has improved so significantly that we are at predot. com-collapse levels when it comes to monthly job-cut announcements. There have been 15 consecutive months in which job cuts have not exceeded 100,000. Job cuts have not exceeded 50,000 since March,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

To put this in perspective, job cuts never fell to these levels following the 2001 recession; not even when the economy was reaping the rewards of the housing boom. You have to go all the way back to the expansion of the late 1990s and early 2000 to find a similar pace of downsizing,” said Challenger.

We are faced with the situation where jobs are being lost at normal rates, but jobs growth is far below normal. I have discussed this issue at length in Does Jobs Number Imply a Leg Down?