What Is the ADP National Employment Report?
- The ADP National Employment Report is a monthly economic data release tracking levels of nonfarm private employment in the U.S.
- Automatic Data Processing Inc., the firm that has prepared the report since 2006, handles payroll for about a fifth of U.S. private employment.
- The ADP National Employment Report is viewed as a useful preview to the more detailed Bureau of Labor Statistics' employment situation report.
- It is divided into four separate releases.
Understanding the ADP National Employment Report
If you're not self-employed or a government employee, there is a decent chance that your job payment is processed by Automatic Data Processing Inc. (ADP). The firm handles payroll for about a fifth of U.S. private employment, putting it in a unique position to survey trends in the nation’s labor market.
ADP collects data through the payroll services and benefits administration it provides to companies. It then issues reports on its findings, with help from Moody’s Analytics.
The ADP National Employment Report is released two days prior to the Bureau of Labor Statistics' employment situation report, which is available on the first Friday of each month. Investors and economists see the ADP report as a preview of the more detailed and comprehensive government data release.
Recording the ADP National Employment Report
The methodology of the ADP National Employment Report is managed by Moody’s Analytics. The report is divided into four separate releases, using figures that are seasonally adjusted. Each report provides the following information:
- A national snapshot showing the change in the number of nonfarm private payrolls and breaking that change down by the size of the business and industry.
- Small businesses: breaks the change in payrolls down by size (small and very small) and broad sector (goods-providing or services-providing).
- Franchises: breaks changes in employment in that sector down by industry, such as restaurants, accommodations, and real estate.
- Regional assessment of employment trends, highlighting changes in six states (California, New York, New Jersey, Texas, Florida, and Illinois), for which it provides sector and industry breakdowns.
Example of the ADP National Employment Report
In June 2019, private-sector employment increased by 102,000. That figure represents a sharp increase on the prior month but is still substantially lower than the job creation seen over the past year.
Moody’s said the findings prove that the labor market is “shifting into a lower gear.” Economists credited the recent slowdown to two factors: One, that the U.S. is running out of workers and two, that trade wars are striking fear into the economy, prompting employers to get nervous about taking on new staff.
The number of people in employment tells us a lot about the state of the economy. The chart below illustrates nonfarm private employment data since 2003. As you can see, the great recession coincided with a dramatic rise in unemployment.
A population that is fully employed and earning a paycheck is synonymous with a strong economy. More money is circulating, triggering demand for goods and services and job opportunities for people to help manufacture and sell them.
Eventually, demand for labor can outstrip supply—a trend that some economists warn is currently taking shape. When this occurs, employees have greater bargaining power to demand better wages, leading to falling corporate profits, higher inflation, and pressure to raise interest rates.