First decline since January
Stocks are rallying on upbeat manufacturing data, but the latest survey from ADP suggests that the bump on the road to recovery dulled hiring last month.
The ADP National Employment Report showed that private sector employment fell by 10,000 in August, while July was revised from 42,000 to 37,000. The report indicated that 30,000 jobs in the service sector were offset by a loss of 40,000 among goods producers, including a 6,000 dip in manufacturing. Augusts' drop in overall employment is the first decline since January.
Interestingly, the decline in manufacturing contradicts the robust number seen in the ISM survey, which also looked at August and was released today.
Unlike the government’s survey of nonfarm private sector payrolls, which has been more volatile and reflected growth that has exceeded 100,000 during March and April, ADP’s report has been less robust, averaging gains of just 37,000 from February through July.
Although it does get some attention in the financial media and among analysts, the government’s nonfarm payroll report is still the 800 pound gorilla that is the most closely followed and can have a big impact on stocks and bonds when released.
The ADP Employment Report is derived from an anonymous subset of roughly 500,000 U.S. business clients. During the twelve month period through June 2010, this subset averaged over 340,000 U.S. business clients and over 21 million U.S. employees working in all private industrial sectors.
Even if the ADP number is too pessimistic (recent data suggest this is the case) and the economy managed to create a small number of jobs during August, economic growth has been anemic in recent months, preventing the economy from creating a significant number of new jobs.
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