ADP employment preview: Strong job creation forecast to continue
- Automatic Data Processing (ADP) the US private payroll company is expected to list 189,000 new jobs on its books in October
- The ADP report is a precursor to the US government's Employment Situation Report, commonly known as non-farm payrolls this Friday, November 2nd
- Robust American labor markets should help keep the Federal Reserve on track for a final rate hike in December
The ADP release is forecast to report that US firms using its payroll services added 189,000 new positions in October following 230,000 new jobs in September and 163,000 in August. This ADP number is a lead to the most closely watched and market moving US economic statistic, non-farm payrolls (NFP), which, along with the unemployment rate, average hourly earnings and the labor force participation rate gauge the health of the US labor market.
There is a strong directional correlation between the ADP report and non-farm payrolls. In recent years ADP has changed their methodology to more closely match that of the Bureau of Labor Statistics (BLS), the author of the NFP.
US labor markets are having their best year in the last three. Non-farm payrolls have averaged 208,000 so far this year, ahead of last year’s 182,000 average and 195,000 in 2016, though considerably below the 226,000 average in 2015 and 2014's 250,000. If those last two figures look somewhat unfamiliar, it is because they have been subject to monthly and Annual Benchmark Revisions by the (BLS) and are notably stronger than their initial release.
There is also high positive correlation between the NFP number and the immediate movement of the US Dollar, particularly when the release is substantially better or worse than the consensus.
Private payrolls from ADP have been performing better than expected this year. New positions on company rolls have surpassed forecasts in five of nine months with an average monthly improvement of 12,000. National NFP numbers have also been more buoyant than anticipated. The monthly 208,000 average of new positons this year has surpassed the 190,000 average forecast, though beating estimates only in four of nine months.
The ADP sample derives from its own payroll data which has 411,000 US business clients employing nearly 24,000 million workers in the US.
Chart: Reuters
Author
Joseph Trevisani
FXStreet
Joseph Trevisani began his thirty-year career in the financial markets at Credit Suisse in New York and Singapore where he worked for 12 years as an interbank currency trader and trading desk manager.
