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ADP job report for Match 2013
Change in Nonfarm Private Employment (in thousands)
Automatic Data Processing reported Wednesday that a seasonally adjusted 158,000 private-sector jobs were added to the economy in March, considerably fewer than forecast by a consensus of experts surveyed by Bloomberg in advance. That suggests that the government's monthly jobs report due out Friday from the Bureau of Labor Statistics could be disappointing.

However, even though it changed its methodology in November, ADP's numbers and BLS numbers often don't mesh on a month-to-month basis. They are quite close on a yearly basis. For example, in March, the BLS reported a seasonally adjusted addition of 246,000 private-sector jobs, with 10,000 layoffs in the public sector, the latter being a continuing problem. In its Wednesday report, ADP revised its numbers of private-sector jobs added in February to 237,000, much closer to the BLS figures for that month.

The consensus of experts estimates the BLS will report an increase of 193,000 jobs for March with both the private and public sectors taken into account.

Neither of the reports explains how good the added jobs are, how much they pay nor whether they are part time or full time.

It's not often noted, but the BLS itself points out that its monthly jobs numbers are subject to a ±100,000 fudge factor. In other words, if it announces a seasonally adjusted addition of 200,000 new jobs, the actual total could be anywhere from 100,000 to 300,000. That pretty much makes the headline number that most of the media will focus all their attention on a sham. Not because of any conspiracy, but because the methods of gathering the statistics that go into the report and the formulas for adjusting them are subject to a good deal of guesswork and tweaking. That's one reason the numbers are revised for two months after the initial release and again on an annual basis.

One good thing about the ADP report is that it shows a breakdown by business size. For March, small businesses (1-49 employees) added 74,000 jobs, medium-sized businesses (50-499 employees) added 37,000 and large businesses (500 or more employees) added 47,000. Although sales of existing and new housing units have been rising, ADP reported that no new construction jobs were added in March.

One reason for this may be what economists call "labor hoarding." Jed Kolko at Trulia, Ezra Klein at Wonkblog and a multitude of other economy watchers have pointed out this seeming anomaly. During down times, despite laying off workers during downturns, employers hang onto some they don't actually need right away because they want to be sure to have their skills when they do need them again. So they cut their hours and keep them around. When business picks up, they add their hours back before hiring additional workers. Even in good times, however, the increase in construction and jobs is not linear. When the number of residential housing units under construction goes up 10 percent the construction hires only go up an average of four percent, according to Kolko.

The ADP report is calculated from ADP records that represent some 400,000 U.S. business clients and 24 million U.S. employees in all private industrial sectors.

Originally posted to Daily Kos Labor on Wed Apr 03, 2013 at 12:00 PM PDT.

Also republished by Daily Kos Economics and Daily Kos.

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