ADP’s big upside surprise in its December private payrolls gauge — 297,000 vs expectations for closer to 100,000 — came mostly in services-sector payrolls, which contributed 270,000 of the 297,000. If that number is indeed valid, we thought it’d be logical to assume a nice pop in the employment component in ISM’s December non-manufacturing index, often referred to as the “services” index.
The ISM employment component fell to 50.5 from 52.7, tantalizingly close to the demarcation point between job expansion and contraction, and not exactly strong validation for the ADP gauge. ISM downplays the employment decline relative to ADP’s reading, noting non-manufacturing covers industries outside of “services,” such as construction, as well as public sector employment.
ISM said industries seeing Dec job reductions included: construction; agriculture, forestry, fishing & hunting; arts, entertainment & recreation; accommodation & food services; health care & social assistance; public administration; and wholesale trade.
So the ISM data cast some level of doubt on that beefy ADP number, and according to Newswires’ Kathleen Madigan, even the firm that helps compile the ADP report — Macroeconomic Advisers — has some reservations about its correlation to the actual government numbers due Friday. The firm notes on its blog a few reasons “to be suspicious of this figure,” including seasonal adjustment problems.
“We accept that the (national employment report) is very likely overstating growth of private payrolls” due to the seasonal adjustment issues, the blog says, but “we would not be surprised to see a portion of the unexpected weakness in BLS employment in November reversed and manifested as outsized strength in December.”