November 2014 ADP Job Growth At 208,000, Even Though Under Expectations – It Was A Good Report

ADP reported non-farm private jobs growth at 208,000. This should be again be considered a strong report. What is interesting this month is that the rolling averages have been unchanged for the last 4 months.

Follow up:

The market expected 205K to 240K (consensus 225K) versus the 208K reported. These numbers are all seasonally adjusted.

In Econintersect’s November 2014 economic forecast released in late October, we estimated non-farm payroll growth at 170,000 (unadjusted based on economic potential) and 240,000 (fudged based on current overrun of economic potential).

This month, ADP’s analysis is that small and medium sized business created 80% of all jobs;

Manufacturing jobs expanded.

85% of the jobs growth came from the service sector;

October report (last month), which reported job gains of 230,000 was revised up slightly to 233,000.

The three month rolling average of job growth rate has been statistically unchanged for the last 4 months.

ADP changed their methodology starting with their October 2012 report, and ADP’s real time estimates are currently better than the BLS.

Per Mark Zandi, chief economist of Moody’s Analytics:

Steady as she goes in the job market. Monthly job gains remain consistently over 200,000. At this pace the unemployment rate will drop by half a percentage point per annum. The tightening in the job market will soon prompt acceleration in wage growth.

Per Carlos A. Rodriguez, president and chief executive officer of ADP:

November continued to show solid job growth above 200,000. Small businesses continued to drive job gains adding almost half the total for the month.

Jobs growth of 150,000 or more is calculated by Econintersect to the minimum jobs growth to support population growth (see caveats below). The graph below shows ADP employment gains by month. A graph in the caveats section below compares ADP employment to BLS.

Employment is a rear view indicator, and looking at this ADP data – the overall trend for the year-over-year rate of growth has been flat since mid-2010. (red line in graph below). The year-over-year jobs growth this month is 2.1% with a growth rate statistically unchanged month-over-month.

ADP Non-Farm Private Employment – Total (blue line) and Year-over-Year Change (red line)

Small and medium sized business historically create most of the new jobs (analysis here) when using the ADP data. A continuing take from the ADP data is that small and medium size business continue to be the employment driver. However, the BLS totally disagrees (see caveats below). The current ADP methodology is showing more jobs growth in big business (and therefore less in small business). Likely they are slowly correcting their data base.