The first Friday of every month brings the much-anticipated employment report, in which the Bureau of Labor Statistics tells us how many jobs were created (or lost) in the month, and calculates the unemployment rate. But in the week leading up to the BLS report, we get two private sector readings on the state of the labor market, from ADP/Macroeconomic Advisers and from TrimTabs.
Generally, the three reports move in the same direction. But this month, the two non-government reports are offering contradictory conclusions. The ADP report out this morning provides a snapshot of a private-sector job market that is growing at a rapid rate. The private sector added 206,000 jobs in November, and it revised the total from October from 110,000 to 130,000. That's the biggest single gain in a month since December 2010. ADP found strength in services, manufacturing and construction, with the job creation equally split between large and small businesses. Like BLS, ADP relies on estimates from a survey of employers. Macroeconomic Advisers makes estimates based on the data produced by the 430,000 businesses, covering 23 million employees, for which ADP processes payrolls. ADP's clients cover about 21 percent of private sector employment. (The methodology is described here.)
On the other hand, TrimTabs (trimtabs.com), a firm that looks at data flow, sees a deceleration in jobs growth. Its report suggests that after adding 160,000 jobs in October, the economy added a total of just 64,000 jobs in November. It reaches its conclusions by looking at a different set of figures: the money flowing into the coffers of the Treasury Department, which are reported daily (you can see the Daily Treasury Statement here.) TrimTabs notes that these figures are "historically more accurate than initial estimates from the Bureau of Labor Statistics." Given the amount of payroll and income taxes that are being paid, it can make estimates on the total payrolls.
This month, the reports before the report are offering starkly differing results. Trim Tabs shows a sharp deceleration in the pace of job creation in the economy at large, while ADP shows a sharp increase in job creation in the private sector.
Who's right? They could both be right, to a degree. The ADP figures don't account for the public sector — i.e., government jobs. And as we've long been noting, for the past two years, the public sector has been cutting jobs every month even as the private sector adds them. Any measure that only takes into account private-sector employment is likely to be sunnier than one that looks at all employment. So it's likely that the ADP report could be a little too optimistic. Meanwhile, as we discussed last week, after a summer lull, the general indicators in the economy have been strengthening throughout the fall — including employment indicators. Which leads one to conclude that Trim Tabs may be a bit pessimistic. Splitting the difference between the two yields a gain of about 130,000 jobs for the month, which is pretty close to the trend of recent months.
Daniel Gross is economics editor at Yahoo! Finance.
Follow him on Twitter @grossdm; email him at grossdaniel11@yahoo.com
His most recent book is Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation
37 comments