ADP Employment Survey Says June Worse than May

Let’s all hope the ADP employment figures are wrong, because the news isn’t good. The ADP survey reported that 473,000 private jobs were lost in June, a much greater loss than the median forecast of -360k.

“This is considerably worse than our own forecast for a 290,000 drop,” commented Abiel Reinhart from JPMorgan. “While the ADP employment report has not been terribly accurate, it does pose some downside risk to our forecast.”

In its current form the ADP report has only been around since December, and in those seven months it has undershot the official figures by an average of 113,000, Reinhart noted. “In order to get our forecast, the ADP report would have to undershoot again, and by  a similar amount (183,000) to the prior month.”

However, Joel Prakken, chairman of Macroeconomic Advisors and spokesman for the ADP, called the figures “a notable improvement over the first three months of the year.” 

Prakken said in the first quarter ADP job losses averaged 691,000, whereas in Q2 they averaged 473,000.

“Nevertheless, despite some recent indications that economic activity is stabilizing, employment, which usually trails overall economic activity, is likely to decline for at least several more months, although perhaps not as rapidly as during the last six months.” 

Where the Jobs are Being Lost:

• Total employment: -473,000 
• Small businesses: -177,000 
• Medium businesses: -205,000 
• Large businesses: -91,000 
• Goods-producing sector: -250,000 
• Service-providing sector: -223,000 
• Manufacturing industry:   -146,000

Summing it all up, analysts at RDQ said the report supports the view that the economy is shedding jobs at a slower pace than a few months ago, but the data also indicates that June was worse than May, hurting any thesis of quick recovery.

“We continue to look for a below consensus reading of -400,000 on nonfarm payrolls,” they said.

Prior to the release, HFE economist Ian Shepherdson said that market view of the economy is driven primarily by the direction of the labor market.

“The markets’ collective view of the state of the U.S. economy is driven, above all else, by the payroll numbers,” he said. “Other data can point unanimously up, down, or sideways, but experience shows that the markets won’t be convinced until the message is validated by the employment data.”

The payrolls data for June comes out tomorrow morning an hour before the opening bell.

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