ADP payrolls and ISM differ on employment

Two major labor statistics provided different indications as to the health of the job market in the US last month.

The National Employment Report from Automatic Data Processing (ADP) the private payroll company listed just 27,000 new positions in May. This was far below the 180,000 forecast, the 271,000 April total and the 3 and 12-month moving averages, 152,000 and 202,200 respectively.

Reuters

In contrast the purchasing managers’ index for the service sector from the Institute for Supply Management came in above the 55.5 median prediction at 56.9. Specifically the employment sub-index registered 58.1, a notable jump from April’s 53.7 score which had been the lowest in two years.

Reuters

The service report was better than expected in all categories belying some of the pessimism that had been generated by the same set of surveys for the manufacturing sector. The business activity index rose to 61.2 from 59.5 in April and new orders climbed to 58.6 from 58.1.

Sentiment in manufacturing has been falling since last fall as the long-running trade dispute with China takes its toll on a sector heavily involved with overseas production and sourcing. Services industries tend to be far more localized to the United States and therefore less subject to trade entanglements.

The ADP number is a precursor to the far more important non-farm payrolls figure on Friday.  Though the correlation is generally good anomalies do occur. In February NFP was far weaker than expected at 56,000 though ADP was above trend at 220,000.

Reuters