U.S. private sector employment rose by a net 201,000 (seasonally adjusted) last month, according to this morning’s release of the ADP Employment Report. That’s slightly down from February’s 208,000 gain, although the message is clear: job growth rolls on, albeit at modest levels relative to what the economy needs to bring about a large and relatively quick drop in the still-elevated jobless rate.
Modest, perhaps, but persistent. For the 14th consecutive month, the labor market expanded, according to ADP. The rise suggests that Friday’s release of the Labor Department’s payrolls update for March will also report a similar gain. The crowd is expecting no less. The consensus forecast (according to Briefing.com) among economists anticipates that the government’s estimate of private payrolls for March will jump by a net 203,000. If so, that would be slightly lower than February’s 222,000 gain, although basically in line with what today’s ADP report is telling us.
“The March ADP report leaves us comfortable with our forecast of a 200,000 increase in private payrolls in the month and a 185,000 gain in total nonfarm employment,” advises RDQ Economics via MarketWatch.com.
Speaking for the optimists, Joel Prakken, chairman of Macroeconomic Advisers, which helps compile the ADP Employment Report, says in a conference call today: “This data is pointing to a turnaround in labor-market conditions. It’s pretty clear that employment now has in fact accelerated. Equally encouraging is the breadth of the strength.”
The accompanying press release with today’s ADP report notes that “the average monthly increase in employment over the last four months–December through March–has been 211,000, consistent with a gradual if uneven decline in the unemployment rate. This is almost three times the average monthly gain of 74,000 over the preceding four months of August through November.”
In any given month, the ADP numbers can vary considerably relative to what the Labor Department reports for private nonfarm payrolls. But in terms of capturing the trend, the ADP series generally does a fair job of dropping clues about the government’s estimate of private employment, which is always released a few days after the ADP update.
Consider the historical record for the two series over the last 10 years. Although there’s quite a bit of variation at times in the short run, there’s a relatively high degree of correlation between the two over time, as the chart below suggests.