A Closer Look At Today's ADP Employment Report - Wednesday, Oct. 2

In this morning's ADP employment report we got the September estimate of 135K new nonfarm private employment jobs from ADP, a decrease over August's revised 157K. The popular spin on this indicator is as a preview to the monthly jobs report from the Bureau of Labor Statistics. But the ADP report includes a wealth of information that's worth exploring in more detail.

Here is a snapshot of the monthly change in the ADP headline number since the company's earliest published data in April 2002. This is quite a volatile series, so we've plotted the monthly data points as dots along with a six-month moving average, which gives us a clearer sense of the trend.

(Click on image to enlarge)

ADP Nonfarm Private Employment

As we see in the chart above, the trend peaked 20 months before the last recession and went negative around the time that the NBER subsequently declared as the recession start. At present, the six-month moving average is at its lowest level since 2012.

ADP also gives us a breakdown of Total Nonfarm Private Employment into two categories: Goods Producing and Services. Here is the same chart style illustrating the two. The US is predominantly a services economy, so it comes as no surprise that Services employment has shown stronger jobs growth. The trend in Goods Producing jobs went negative over a year before the last recession.

(Click on image to enlarge)

Goods Producing versus Services

For a sense of the relative size of Services over Goods Producing employment, the next chart shows the percentage of Services Jobs across the entire series. The latest data point is below the record high.

(Click on image to enlarge)

Growth of Services Employment

There are a number of factors behind this trend. In addition to our increasing dependence of Services, Goods Production employment continues to be impacted by automation and offshoring.

For a better sense of the components of the two Goods Producing and Service Providing cohorts, here is a snapshot of the five select industries tracked by ADP. The two things to note here are the relative sizes of the industries and the relative trends. Note that Construction and Manufacturing are Production industries whereas the other three are Service Providing.

(Click on image to enlarge)

Select Industries