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Irrelevant ADP Private Payrolls Number Declines, But Better Than Expected

Tyler Durden's picture


And now it's time to look at the ADP September Private Employment Report which over the past year has had roughly a zero correlation with NFP. Apparently, despite all signs to the contrary, the private sector created 91,000 jobs in September: a month in which stocks and confidence plunged, up 2000 from August, and better than the 75,000 expected. The bulk of job creation supposedly was at the Small Business sector which added 60,000 jobs, 36,000 added to Medium, and Large business dropped 5,000. From the report: "“Like August, this month’s jobs report continues to show modest job creation,” said Gary C. Butler, Chief Executive Officer of ADP. “The number of jobs added to the private sector in August and September were virtually identical. Once again, the small business services-sector led the way, contributing almost two-thirds of all new jobs. Small businesses overall showed positive growth for the 22nd straight month and averaged 73,000 jobs a month for the past 12 months. Professional business services, education and healthcare, and leisure services led all other sectors in new jobs added.” According to Joel Prakken, Chairman of Macroeconomic Advisers, LLC, “Today’s ADP National Employment Report suggests that employment grew moderately in September. The recent trend in private employment, as indicated by the ADP National Employment Report, remains moderate, and probably is below a pace consistent with a stable unemployment rate. Moderate growth in employment is consistent with the recent deceleration of GDP.”

And while we refuse to comment on this indicator which has proven is completely irrelevant in predicting NFP numbers in the past 2 years due to the staggering impact of government jobs, we will shortly present a scientific way to demonstrate why this Friday's NFP will likely be worse than the 60,000 gain expected.

In the meantime, here is the rolling 12 month correlation between ADP and NFP:


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Wed, 10/05/2011 - 08:33 | 1740684 Caviar Emptor
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Oct. 5 (Bloomberg) -- U.S. employers announced the most job cuts in more than two years in September, led by planned reductions at Bank of America Corp. and in the military.

Announced firings jumped 212 percent, the largest increase since January 2009, to 115,730 last month from 37,151 in September 2010, according to Chicago-based Challenger, Gray & Christmas Inc. Cuts in government employment, led by the Army’s five-year troop reduction plan, and at Bank of America accounted for almost 70 percent of the announcements.

Wed, 10/05/2011 - 08:54 | 1740758 ratso
ratso's picture

Oh, now I get it - All bad news is bad news and all good news is bad, wrong or irrelevant.

The US economy is more resiliant then Tyler thinks.

Wed, 10/05/2011 - 09:00 | 1740782 taraxias
taraxias's picture

And you are more of an idiot than everyone thinks.

Wed, 10/05/2011 - 09:36 | 1741014 Panic Panic Panic
Panic Panic Panic's picture

Wrong. I was sure he was an idiot long before he coughed up this gem.

Wed, 10/05/2011 - 08:34 | 1740687 papaswamp
papaswamp's picture

So basically it is predicting another 0 on BLS employment report...possibly negative. Challenger job cuts does not bode well for Oct-Dec. though perhaps holiday sales hiring will offset. The key to that will be how bad off the consumer is as savings rates and wages drop. 

Will the consumer be too tapped out this season?

Wed, 10/05/2011 - 08:35 | 1740691 HelluvaEngineer
HelluvaEngineer's picture

Considering the huge push for lawaway programs, yes.  Also, that really makes me wonder if alot of the revenue for the season will be booked long before Xmas.

Wed, 10/05/2011 - 08:49 | 1740739 Foxinsox
Foxinsox's picture

Probably not. Assuming most companies follow US GAAP (still a pretty large assumption), revenue can't be booked until the product is delivered, i.e. paid in full. Layaway programs shouldn't have an effect on revenue recognition timing.

Wed, 10/05/2011 - 08:43 | 1740711 Esso
Esso's picture

"Will the consumer be too tapped out this season?"

HELLS NO!!!!! The banksters will loan people all the money they want at 36%+ on their credit cards & friendly payday loan joints.

The sheepsters will lap it up like it's goin' out of style.

Quick! Ding the Xmas bell and get Pavlov's sheep fizzin' & foamin'!

Wed, 10/05/2011 - 08:44 | 1740722 mayhem_korner
mayhem_korner's picture

Not this year, methinks.

Wed, 10/05/2011 - 09:39 | 1741023 Panic Panic Panic
Panic Panic Panic's picture

Wuh? Was that the Christmas bell already?  I better gas up the statio wagon and hit the mall PRONTO!

Wed, 10/05/2011 - 09:58 | 1741103 Esso
Esso's picture

Better hurry! Menard's has had their Xmas stuff for a couple of weeks now. Chop, chop!

Wed, 10/05/2011 - 09:37 | 1741015 Taffy Lewis
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And just before Thanksgiving, USA Today will run a front-page article declaring fantastic Christmas sales because Santa Claus told them that he was hiring elves like crazy to meet demand... That's all that the sheeple need to hear.

Wed, 10/05/2011 - 08:47 | 1740733 Caviar Emptor
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With low-mid end restaurant chains going into bankruptcy I don't think the outlook is good

Wed, 10/05/2011 - 08:34 | 1740688 HelluvaEngineer
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Holy crap.  Does this ever make me want to buy overpriced  stocks.  Now, what to choose, so many good options...

Wed, 10/05/2011 - 08:34 | 1740689 doomandbloom
doomandbloom's picture

yup NFP beat , it will be

Wed, 10/05/2011 - 08:36 | 1740694 cossack55
cossack55's picture

I know my local gunshops have been hiring. Always crowded.

Wed, 10/05/2011 - 08:48 | 1740732 dwdollar
dwdollar's picture

Sometimes I wish I would have become a gunsmith.

Wed, 10/05/2011 - 08:52 | 1740755 HelluvaEngineer
HelluvaEngineer's picture

I bet your average gunsmith is lucky to make $30k a year

Wed, 10/05/2011 - 09:00 | 1740786 cossack55
cossack55's picture

My favorite gun-guy also buys Au/Ag.  Pays 1/2 spot, or less.  Methinks 30k/annual is a little low.  Also sells guns to dopes who return in 6 months and sell it back to him for 40% purchase price.

Wed, 10/05/2011 - 09:33 | 1740997 Surly Bear
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I hear the big money in guns has something or other to do with the ATF, but I could be wrong....

Wed, 10/05/2011 - 08:36 | 1740695 mayhem_korner
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Based on the Challenger numbers, I suspect 90,000 of the new hires are outplacement specialists.

Wed, 10/05/2011 - 08:40 | 1740705 Caviar Emptor
Caviar Emptor's picture

Don't forget surge in drug abuse treatment, divorce counselors, child abuse specialists and prison-industrial complex

Wed, 10/05/2011 - 08:36 | 1740700 Caviar Emptor
Caviar Emptor's picture

Despite record low mortgage rates engineered through operation Twist, mortgage apps fall!

Refi index -5.2%, purchase index -0.8% market composite -4.3%

Middle class can no longer be stimulated or tempted with dropping cash, jobs, incomes, net worth, advancement opportuniities AND rising cost of living. 

Wed, 10/05/2011 - 08:59 | 1740779 papaswamp
papaswamp's picture

I think it is a huge tapped out signal. I'm beginning to feel as though this holiday season might be quite ugly.

Wed, 10/05/2011 - 08:37 | 1740702 RobotTrader
RobotTrader's picture

The lows are probably in for a few weeks.

Market sentiment was the worst I've ever seen since 2008.

Wed, 10/05/2011 - 08:41 | 1740713 mtremus
mtremus's picture

good luck with that call. maybe 2 days, but thats about it


Wed, 10/05/2011 - 08:45 | 1740726 Joe Shmoe
Joe Shmoe's picture

I think you're right again.  The past couple of weeks have seen an overwhelming majority of bearish negative gloom and doom commentators and articles in a wide range of news outlets (I don't watch TV, so I'm not referring to cable news).

My bartender explained to me yesterday how the economy is collapsing and that shorting stocks is the way to go.  

While many ZHers will pile in with him, never trust the easy trade.  

Wed, 10/05/2011 - 08:58 | 1740775 Kina
Kina's picture

No longer TA. We are now dealing with real time reality.


This is now reality, when the shoe shine lad tells you the global economy is fucked then it is most certainly FUBAR>  OR some think it is going to start raining free oil, gold bars and another dozen continents are suddenly going to be discovered.

Wed, 10/05/2011 - 08:50 | 1740742 LongSoupLine
LongSoupLine's picture

nope...the oversold indicators are NOT the worst, and in fact show things are just winding up for major selling.

"sentiment" is just one indicator, and frankly is very unreliable unless matched/layered with other technicals.  But, you already knew all this when posting "selective data", didn't you robotroll?


Wed, 10/05/2011 - 09:07 | 1740841 Joe Shmoe
Joe Shmoe's picture

I think the point is that the story is more nuanced than the "all-bear" or "almost a recovery" polar ends of the spcetrum.  When bears are sooo absolutely certain that they have it exactly figured out, they sound naive.  Just like the bulls did in the late 90s.  The obvious call is the one that's made over and over and over again in places like this site, and now on every comment board on every mainstream newspaper site.  When anyone offers something that questions the bearish status quo, they get slammed.  The bears sound like blind faithful to me.  They may be right, of course.  Or they may just end up drinking poison cool aide and getting castrated...

I never trust the over-confident. 

Wed, 10/05/2011 - 08:39 | 1740703 Fate
Fate's picture

More useless propaganda.

Wed, 10/05/2011 - 08:41 | 1740712 TruthInSunshine
TruthInSunshine's picture

If fading ADP is wrong, baby, I don't want to be right.

Wed, 10/05/2011 - 08:42 | 1740716 Anonymouse
Anonymouse's picture

A bit OT, but what happened to Bruce Bartlett?  

He's calling for fiscal stimulus, monetary stimulus, nominal GDP targeting by the Fed, doesn't care about regulation, wants to raise taxes.

Either the Keynesians put a pod under his bed while he slept, or someone got some incriminating photos of him.

Wed, 10/05/2011 - 08:42 | 1740718 Silverhog
Silverhog's picture

My daughter just got her pink slip yesterday after 2 years working at an Mac store (independent from Apple). They let everybody go who was making $15 or more an hour. Rehiring at $10. There is your job recovery.

Wed, 10/05/2011 - 08:48 | 1740734 junkyardjack
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In Ron Paul's free market they'd be rehiring at $2.  We'd have full underemployment.  Paul 2012

Wed, 10/05/2011 - 08:52 | 1740750 dwdollar
dwdollar's picture

So true... In Ron Paul's economy $2 would buy a tank of gas.

Wed, 10/05/2011 - 08:43 | 1740719 Rikky
Rikky's picture

did anyone here ever think the problem isn't the ADP report its the NFP?  the ADP report is based on REAL, ACTUAL private sector employment.  God Forbid!  the NFP is a mish mash of half truths and lots of fabricated theories.  i'd trust the ADP numbers over the NFP any day but we've been so indoctrinated to believe the lies coming from our government we end up believing them.

Wed, 10/05/2011 - 08:43 | 1740720 prophet
prophet's picture

He declines the need for any credibility.

Wed, 10/05/2011 - 08:46 | 1740729 Caviar Emptor
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Major restaurant chains announcing bankruptices as new evidence of rotting out of US midddle class proliferates. These aren't tech companies or 'old economy' business models. On the same note Yum Brands announced earlier that they're dumping 2 major US restaurant chains (Long John Slver's and A&W) but expanding operations in India. Coca Cola contracting in US but also expanding overseas

Friendly's bankruptcy rumors come on heels of several other high-profile restaurant chain bankruptcy filings. Sbarro, Charlie Brown's Steakhouse and Fuddruckers have all filed papers in recent months. Like Quiznos, which has not officially filed for Chapter 11 protection despite persistant rumors, Friendly's was not eligible for inclusion on a recent list of restaurant chains likely to go bankrupt because its stock is not publicly traded.

Wed, 10/05/2011 - 08:46 | 1740730 warchopper
warchopper's picture

How high will Buffet's dead cat bounce?

Wed, 10/05/2011 - 08:48 | 1740736 Anonymouse
Anonymouse's picture

Depends.  Is his cat in the bathtub with him?

Wed, 10/05/2011 - 08:51 | 1740746 Anonymouse
Anonymouse's picture

Nice shout out from CNBC to ZH just now

Wed, 10/05/2011 - 08:57 | 1740770 prophet
prophet's picture


Wed, 10/05/2011 - 09:11 | 1740863 Anonymouse
Anonymouse's picture

Oooh, that was a cheap shot.

Wed, 10/05/2011 - 08:58 | 1740772 Esso
Esso's picture

About what? Has the goobermunt declared Tyler Durden the new #1 terrorist & threat to our freeedumbs?

Wed, 10/05/2011 - 09:13 | 1740872 Anonymouse
Anonymouse's picture

Not sure.  Caught the tail end.  Cramer said something about embargos of news stories I think, then my ears pricked up, but after that they talked about Tyler Durden and Fight Club

Wed, 10/05/2011 - 08:53 | 1740752 Kina
Kina's picture

Global economic data and risk is a total disaster and the only thing that can possibly happen now, guaranteed, is for everything to get disasterously worse.

There is very little doubt now that the shit is hitting the fan and the larger globs are on an irreversible trajectory into the blades. We can with morbid sureal curiosity actually watch the blades churn up the shit...aka The Matrix slow motion.

There is nothing left, no way out, it is a matter of grabbing umbrellas.

So how the fuck are Europe and US stocks surging as though we have hit a purple patch of global economic boom time. It is totally stupid, insane and beyond belief, a total fabrication because nobody knows what else to the TPTB and their band of sycophantic helpers pile into stocks as rose colored glasses.

As I have said before...Bernanke, JPM and the whole crew have moved on to taking their dumps  on the sidewalk in plain view. No modesty or attempts to hide their shitful activities.

Unless there is a delegation from Mars seeking to buy a trillion iPads it is time to duck.



Wed, 10/05/2011 - 09:46 | 1741054 Are you kidding
Are you kidding's picture

No...not Mars...war. It's the great "fixer". 

Oil is coming down in price, pissing off the Arabs.  Something will happen and we'll be at war with them.  A nuke somewhere in the US?  We'll cancel our debts to them and take their oil for free.  Win-win for us...and well, we ALL know, they're happier living in the 7th century anyway...Islam will cease to be a threat as any local problem Muslims will be dealt with during the war.  Austerity will have "willingly" occured during wartime, foreign debt will be cut way back because all debt with the enemy will be canceled, people will get used to living without the government nanny.  The Mexicans will be "forced" out as Americans DEMAND their jobs when food stamps and section 8 are stopped due to lack of funds due to the war effort.  All former welfare recepients are welcomed to join the Army...encouraged actually.  The Army becomes 85% minority.  Rationing will occur.  Bartering will occur. 

Good things are coming after the years of horror during the war.  We'll get another 20 good years of "free" oil growth before we have to deal with reality again.

Am I close?

Wed, 10/05/2011 - 09:47 | 1741058 Panic Panic Panic
Panic Panic Panic's picture


Wed, 10/05/2011 - 08:54 | 1740760 prophet
prophet's picture

Aggregate numbers are of increasing interest.  What are the G-20 econometrics?  Once TGI (The Great Intervention) happens the measures of the whole will increasingly influence markets.  The EU stick save may be epic (one way or another) but the G-20 moves will add a whole new dimension. 

Wed, 10/05/2011 - 11:20 | 1740765 rwe2late
rwe2late's picture



The accuracy of the ADP report and the value of its month-to-month comparisons may be limited by a reliance on extrapolating ADP payroll accounts, and revisions based on BLS quarterly reports and the Census Bureau’s “seasonal adjustments” program. 

Wed, 10/05/2011 - 09:01 | 1740794 Shizzmoney
Shizzmoney's picture

"Small businesses overall showed positive growth for the 22nd straight month"

I am sure if you actually interviewed small businesses, that would very much disagree.

Not only that, what's troubling for both these reports, AND politicans like Rick Perry who go, "Look at der Jobs I created!", is that we just look at the fact jobs were created, as a number, rather than the QUALITY of jobs offered and the QUALITY of the pay and benefits those jobs have.  Here in MA, we have 7,4% unemployment, top 5 in the nation.  BUT what's not told is around 25-33% of those jobs are actually contract temp positions that don't offer health care and a median wage that is only going to get lower thanks to the Fed and their killing of our currency.

Often, thanks to gov't regulations and corporate greed, there is one word to describe the quality of these jobs, a scientific word that really sums up the environment today: "Shitty".

Wed, 10/05/2011 - 09:19 | 1740909 marcusfenix
marcusfenix's picture

so if ADP showed contraction from last month, we are pretty much guaranteed a NFP print in the negative yes?

Wed, 10/05/2011 - 09:22 | 1740923 Village Smithy
Village Smithy's picture

No one especially CNBS, is talking about Hurricane Irene. Tons of clean-up work has to be included in recent employment numbers, especially in small business. I think Irene has also contributed to some better than expected sales (ie. Durable Goods) numbers. We saw alot of appliances floating down the river. 

Wed, 10/05/2011 - 09:22 | 1740931 Kina
Kina's picture

The US is in the process of discovering a new equilibrium, the new norm of economic activity. And it will be at a much lower level. 22% unemployment will become the new acceptable reality aka the Great Depression.


A lot more jobs to be shaken out yet a few more industries to be smashed on the back of Europe's implossion, then a correction of an overshoot will see some jobs growth until the equilibrium is reached. At least another year of this before we are even close to stabalising.



Wed, 10/05/2011 - 09:23 | 1740935 Kranskee
Kranskee's picture

Small business, eh?  And professional business services, leisure services and some others lead the pack?  So, if I am fired from my job as a management consultant and can't find another so I set up shop in my basement and go it alone, a job just got added among small business?  Is that how it works?


What about a single mom who can't find a job so she decides to advertise in her community paper as an escort.  Would that be "leisure"?

Wed, 10/05/2011 - 09:51 | 1741076 Panic Panic Panic
Panic Panic Panic's picture

That's physical therapy.

Wed, 10/05/2011 - 09:24 | 1740947 NEOSERF
NEOSERF's picture

The small business sector ALWAYS leads the way because that's where the birth/death ratio does its manipulation...large companies don't birth die...often...

Wed, 10/05/2011 - 09:40 | 1741027 FMR Bankster
FMR Bankster's picture

True, but not the way it's often interpeted. Birth/death is a LAGGING indicator. They use old data to come up with averages to plug in now. So they NEVER get it right or catch the turns, like now, when the economy is slowing sharply and they plug in data relecting an average of job adds LAST YEAR. That's why there are always big revisions a year or two later. And since the economy has been in the sh**ter since 2007 most, but not all, are down.

Wed, 10/05/2011 - 10:50 | 1741306 i-dog
i-dog's picture

"Professional business services, education and healthcare, and leisure services led all other sectors in new jobs added"

Oh, goody! ... that'll solve the balance of payments problem with China and address the structural disappearance of productive manufacturing!!

Wed, 10/05/2011 - 11:28 | 1741448 buyingsterling
buyingsterling's picture

Few of our 'leaders' are talking about radical solutions (Ron and Rand Paul come to mind - anyone else?) Every discussion about what will happen with employment is _assumed_ to unwind in this straightjacketed, fascistic environment. Where is the legislation to scrap 80%+ of regulations? Sure Obama will veto it, or it may get hung up in the Senate, but lets do it anyway. Are we really that much safer than we were when we had 80% fewer regulations? How about exempting all salaries/wages/profits under $100K (or 80K) from taxation? If you earn less than that, you don't have to file. And/or limit unemployment insurance to 3-6 months, but people get the full 3-6 months whether they go back to work or not.

Those ideas might stink, but the employment situation will not change until peoples' thinking about starting small businesses changes. Most people have some skills that others will pay for, but they are spending their days idle.

Wed, 10/12/2011 - 11:48 | 1765975 karmete
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