ADP National Employment Report: The Breakdown

The ADP National Employment Report (also known as the ADP Report) is a monthly economic data release that offers a snapshot of the private sector employment situation in the US. ADP collects data and produces this report in collaboration with the Stanford Digital Economy Lab using actual transactional payroll data from approximately 460,000 companies they serve. These companies represent a broad cross section of US industries and regions, making the ADP report a trusted and valuable resource for economists, investors and policymakers. It is also an earlier release to its US government-produced change in nonfarm payrolls (NFPs) The methodology for calculating the ADP National Employment Report is managed by Moody's Analytics.

Why is the ADP National Employment Report Important?

The ADP Report is important for several reasons:

1. Labor Market Indicator: The report gives us a timely look at private sector employment, a big part of the US economy. By tracking private sector employment, the ADP report helps measure job gains and job losses, pay growth and sectoral employment trends.
2. Predictive Value: The ADP report is released two days before the Bureau of Labor Statistics (BLS) releases its more comprehensive Employment Situation Report which includes data on both private and government employees. So, the ADP report is often used as a leading indicator to predict the popular BLS numbers and give investors and policymakers an early warning on labor market movements.
3. Sectoral Insights: Unlike other employment reports that may provide aggregate data, the ADP report breaks down employment changes by industry sector offering a detailed view of which sectors are gaining or losing jobs. This level of detail is very valuable information for understanding sectoral trends and dynamics.
4. Economic Forecasting: For economists and market analysts the ADP Report is a key tool for economic forecasting. The job and pay data help shape expectations for consumer spending, business investment and overall economic growth.

A change in employment levels can be indicative of the economic state, influencing interest rates.

ADP Employment Report

Data and Methodology

The ADP Employment Report is based on anonymized and aggregated payroll data from ADP’s client base. This data is from company payrolls and is a broad-based sample of private sector employment. The report covers US private employment changes in nine regions and several major industry sectors, excluding government.

ADP works with the Stanford Digital Economy Lab to ensure the accuracy and reliability of the report. The methodology for the monthly report involves adjusting the raw payroll data for seasonality and other factors that impact broad sector employment trends. This helps give us a representative view of the monthly change in nonfarm private sector employment.

Report Components

1. Headlines: The report starts with the headlines that summarize the total number of jobs added or lost in the private sector for the previous month. This is the most popular part of the report as it gives us a quick view of employment trends.
2. Sectoral Breakdown: The ADP report breaks down employment changes by industry sector including health services, information technology, financial activities sector and more. This gives us a view of which sectors are adding jobs and which are losing jobs.
3. Business Size: The report also categorizes employment changes by business size to give us a view of whether small, medium or large companies are showing unique employment trends.
4. Regional: Employment changes are analyzed across 9 regions to give us a geographic view of job gains and losses.
5. Pay Trends: The report includes pay growth data to inform on trends in compensation trends for job stayers and job changers. This is important for understanding broader labor market dynamics, wage pressures and consumer spending potential.

How to Read the ADP Report

The ADP Report is a useful tool for understanding the labor market but should be read in the context of other economic indicators. For example, while the ADP report gives a monthly snapshot of private sector employment, it doesn’t include government employees so it’s not as comprehensive as the BLS Employment Situation Report.

Economists and analysts often compare the ADP employment numbers to weekly jobless claims data, the BLS survey and other labor statistics to get a fuller view of employment trends. The ADP report’s transactional payroll data gives it a significant credibility and value, but its predictive power is best used in conjunction with other data sources.

About the ADP Research Institute

The ADP Research Institute is responsible for producing the ADP Report. This institute is focused on providing an independent measure of labor market trends using ADP’s payroll data. The collaboration with the Stanford Digital Economy Lab ensures report details and data are accurate and that it offers credible and valuable information.

Bottom Line

The ADP National Employment Report is a key source of labor market data that offers a timely and detailed view of private sector employment in the US. By looking at data from a broad-based sample of client companies, the ADP private employment report gives us a representative view of job growth, pay growth and sectoral employment changes.

For investors, policymakers and economists, the ADP report is a critical tool for making decisions and forecasting labor market trends. Its monthly representative picture of nonfarm private sector employment offers a comparative preview of the BLS Employment Situation Report, making it a crucial part of the economic analysis and forecasting process.

FAQs

What does ADP stand for?

ADP stands for Automatic Data Processing. ADP is a leading outsourcer of business administration services including payroll, HR, and tax services. Many U.S. employees are familiar with ADP because their employers use ADP to process their payroll.

What does the ADP employment change measure?

The ADP National Employment Report (also known as the ADP Report) is a monthly economic data release that offers a snapshot of the net change in private sector employment and a broader assessment of the employment situation in the US.

How does ADP data help inform companies strategies for navigating the labor market volatility?

The ADP report helps companies manage risk with data that gives a representative picture of the current labor market, allowing employers more flexibility with their workforce decisions. The provided data also allows for better contingency planning. By assessing labor market conditions, companies can balance retention and layoff strategies with alternative cost-cutting measures.

How do employment trends influence economic forecasts and investment decisions?

Employment trends serve as a gauge for economic activity, shaping monetary policy, capital markets behavior, and business investments. Labor data is carefully monitored by policymakers and investors to help spot risks or opportunities and ensure more strategic decision making.

Why is the ADP report important to stockholders?

The ADP Jobs report is important because it can be the source of stock market volatility as investors monitor labor market strength to evaluate broader economic health. Generally speaking, a strong jobs report tends to lift stocks, while conversely, a weak report tends to send stocks lower – all else equal.

What is the difference between the ADP national employment report and the Bureau of Labor Statistics report?

ADP data only covers non-farm, private employees from the company’s own database. As a government body, the Bureau of Labor Statistics survey also includes government employees.