The Day Ahead: ADP Payrolls May Set the Tone

By: Matthew Graham

Even before ADP changed its methodology in late 2012 for their private payrolls report (ADP National Employment), it was the best proxy for the NFP report 2 days later.  Unfortunately, the pre-2013 relationship was plagued by instances of "big misses" in the short term, even if things tended to line up quite well long term, after revisions.  This chart represents revised figures for both ADP and BLS (except the most recent mark which hasn't had a chance to be revised yet).

Since the methodology change, 7 out of 9 reports have accurately predicted the direction of movement in the official private payrolls tally from BLS (Bureau of Labor Statistics).  Furthermore, the notion that ADP has only been able to look so accurate due to revisions has been increasingly dismantled by reality.  The fact is that ADP is destroying BLS in terms of consistency from initial print to revision.  Here's how they've compared in 2013 so far (keep in mind that the most recent point on chart is unrevised so both data sets converge).  BLS numbers are in the blue/teal tones.  ADP numbers are in red tones.

This more even-keeled forerunner of tomorrow's NFP number will be out today at 8:15am, likely setting the tone for the session if it's much higher or lower than the 180k forecast.  After that, there are two more reports that can certainly have an impact: Jobless Claims at 830am and ISM Non-Manufacturing at 10am.   If the overall tone is economically bullish, we could see the initial break outside the pre-NFP range that continued to hold yesterday.

MBS Live Econ Calendar:

Week Of Tue, Sep 3 2013 - Fri, Sep 6 2013

Time

Event

Period

Unit

Forecast

Prior

Tue, Sep 3

08:58

Markit Manufacturing PMI

Aug

--

 

53.9

10:00

ISM Manufacturing PMI

Aug

--

53.5

55.4

10:00

Construction spending

Jul

%

0.4

-0.6

Wed, Sep 4

07:00

MBA Mortgage market index

w/e

--

--

439.2

08:30

International trade mm $

Jul

bl

-38.5

-34.2

Thu, Sep 5

08:15

ADP National Employment

Aug

k

175

200

08:30

Initial Jobless Claims

w/e

k

330

331

08:30

Productivity Revised

Q2

%

1.6

0.9

08:30

Labor costs Revised

Q2

%

0.6

1.4

10:00

Factory orders mm

Jul

%

-3.3

1.5

10:00

ISM N-Mfg PMI

Aug

--

55.0

56.0

Fri, Sep 6

08:30

Non-farm payrolls

Aug

k

180

162

08:30

Unemployment rate mm

Aug

%

7.4

7.4

08:30

Average workweek hrs

Aug

hr

34.5

34.4

08:30

Private Payrolls

Aug

k

181

161

08:30

Average earnings mm

Aug

%

0.2

-0.1