Update: Goldman commentary which mirrors ours:
- The ADP estimate of private employment growth was +119k for April, below the consensus expectation for a 170k gain (growth in February and March was also revised down slightly). As with the official BLS count of employment, we believe that a “payback” from warm weather earlier in the year could explain some of the slowing in the ADP measure in both March and April.
- Results from the ADP report were mixed across industries. Employment at goods producing firms declined by 4k, with declines of 5k in both manufacturing and construction employment. The decline in manufacturing employment looks at odds with other information on the sector, such as yesterday’s ISM report. The drop in construction employment may be partly weather-related. Service sector employment rose by +123k, down from +158k in March and +184k in February.
Those hoping Goldman's NFP forecast of 125,000, well below consensus, is wrong, may have to reassess their thesis following the just released ADP number which came as a big disappointment to consensus of 170,000, instead printing at only +119,000, to 110,590. (The previous improvement was also downward revised from +209K to +201K). This was the lowest sequential change since September 2011, and confirms once again, the declining trends last seen in... 2011. It was also the biggest miss in 11 months. Luckily, as the scatterplot below shows, ADP is completely meaningless when predicting NFP so our gut reaction would be to expect a beat in NFP based on this print considering the whole Schrodinger economy and what not (see China). However, on an apples to apples basis, one thing is certain: record warm winter payback is a bitch. And finally, that whole Obama export renaissance is not doing all too hot: goods producing sector: -4,000 in April, while manufacturing jobs declined by -5,000. But, but, the soaring ISM..... oh forget it.
From the press release, where we find Hopium is back. How shocking that even ADP has been exposed to have a subjective, upward bias.
“According to data shown in the ADP National Employment Report, monthly employment gains averaged just over 200,000 during the first quarter of this year,” said Carlos Rodriguez, President and CEO of ADP. “This month’s modest increase of 119,000 jobs appears consistent with the first-quarter Gross Domestic Product growth of 2.2 percent.
We hope future rates of job creation will be more aggressive and sustained,” Rodriguez added.
According to Joel Prakken, Chairman of Macroeconomic Advisers, LLC, “While April’s increase was the twenty-seventh consecutive monthly advance, it nonetheless reflected a deceleration in the recent pace of hiring. This deceleration seems consistent with other incoming data, including a disappointingly weak report on first-quarter Gross Domestic Product, a recent back-up in initial unemployment claims, and last month’s relatively weak reading on establishment employment reported by the Bureau of Labor Statistics.”
Prakken added: “There is some evidence that unusually warm weather boosted employment during the winter months, with a “payback” now coming due. The modest rise in private employment suggests that the national unemployment rate probably did not decline in April unless there was a notable decline in the labor force.”
From the report:
Employment in the U.S. nonfarm private business sector increased by 119,000 from March to April on a seasonally adjusted basis. The estimated gain from February to March was revised down modestly, from the initial estimate of 209,000 to a revised estimate of 201,000.
Employment in the private, service-providing sector increased 123,000 in April, after rising 158,000 in March. Employment in the private, goods-producing sector declined 4,000 jobs in April. Manufacturing employment dropped 5,000 jobs, the first loss since September of last year.
Employment on large payrolls—those with 500 or more workers—increased 4,000 and employment on medium payrolls—those with 50 to 499 workers—rose 57,000 in April.
Employment on small payrolls—those with up to 49 workers—rose 58,000 that same period. Of the 57,000 jobs created by medium- sized businesses, 8,000 jobs were created by the goods-producing sector and 49,000 jobs were created by the service-providing sector.
Construction employment also fell by 5,000, the first decline in seven months and following healthy gains during the unusually warm winter months. Employment in the financial services sector increased 13,000 in April, marking nine consecutive monthly gains there.
Biggest miss since May 2011:
Finally, courtesy of John Lohman, here is why this number is completely meaningless when predicting NFP: