Here's Your Preview For This Month's Proxy Jobs Report SAM RO

High Frequency Economics

Thanks to the government shutdown, the Bureau of Labor Statistics won't be publishing its monthly employment situation report (aka "the jobs report").




For now, we'll have to make do with the data provided by the private sector.

On Wednesday, the world will be paying particularly close attention to ADP's national employment trends report.

ADP's numbers have long been considered a preview to the jobs report's private payrolls number, which is published days later by the BLS. However, economists have also approached it with caution due to its history of being inaccurate.

But some have noticed that it has been improving as a proxy for the official BLS report.

"[T]here has been a growing case for the ADP report to get more attention than it did in the past; its reliability seems to have improved since Moody’s replaced Macroeconomic Advisers as the compiler of the data late last year," said High Frequency Economics' Jim O'Sullivan. "ADP’s misses have averaged 38K—without regard to sign—in the 11 months since Moody’s took over, down from 63K in the previous 11 months. Of course, that is just an average. Misses have ranged from -63K—with payrolls weaker than ADP—to +57K—with payrolls stronger than ADP. Last month’s miss was -24K, with the ADP series up 176K and private payrolls in the BLS report up 152K; total payrolls rose 169K."

"Unfortunately, we will still lack the other labor-related data provided by the monthly employment report, such as the length of the workweek, average hourly earnings and the unemployment rate," said Deutsche Bank's Carl Riccadonna. "So while ADP will provide a reasonable substitute for payrolls, the trajectory of aggregate income growth (the product of workers, hours and wages) will remain largely unknown."

Bottom line: ADP's report is not a perfect proxy for the the BLS's report. But it might just be the next best thing.

The consensus expects ADP to report 180,000 payrolls added in September, up from 176,000 in August.

Few market economists actually provide forecasts for ADP. Here is what some of them are saying:
Carl Riccadonna, Deutsche Bank (+170,000): "Our forecast for ADP is +170k, which is the same as our forecast for private payrolls. We assume that net government hiring is flat in September following a +17k increase in August and a -23k decline in July; our sense is that the public- sector drag on hiring is abating as state and local government finances continue to improve."
Bank of America Merrill Lynch (+170,000): "Mixed economic data and uncertainty regarding monetary and fiscal policy likely weighed on hiring. As a result, we expect to see another month of decent job gains. This would be modestly higher than the 6-month moving average of 164,000."
Brian Jones, Societe Generale (+235,000): "Improved business conditions between the August and September establishment surveys, along with a further drop in the average number of persons filing initial claims for jobless benefits, suggest that the number of private payrolls processed jumped by 235,000 – the largest job gain since last November."

The ADP report will be released at 8:15 a.m. ET on Wednesday.