Will ADP’s Employment Figures Hold Up?

Private employers added a better-than-expected 118,000 jobs to their payrolls in a November, private payroll processor ADP reported on Wednesday. But last month’s figures represented a significant decrease from October’s gain of 184,000, as Superstorm Sandy’s lasting effects diminished hiring in the Northeast.

“Superstorm Sandy wreaked havoc on the job market in November, slicing an estimated 86,000 jobs from payrolls,” said Moody’s Analytics chief economist Mark Zandi, who worked with ADP on the report. “The manufacturing, retailing, leisure and hospitality, and temporary help industries were hit particularly hard by the storm.”

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The storm was not the only obstacle to job growth in November; businesses have indicated that they are holding back on hiring because of uncertainty over the impending tax hikes and spending cuts commonly referred to as the fiscal cliff.

However, Zandi did note that the job market “turned in a good performance.”

The report also stated that hiring increases in the construction sector resulted in the greatest number of job gains of any industry, with 23,000. Transportation, trade, and utilities followed with 22,000, professional and business services added 16,000 jobs, and finance added 13,000. In comparison, the manufacturing sector cut 16,000 jobs.

Job gains were closely linked to company size for the second consecutive month; large companies accounted for the greatest number of job gains with 66,000. Mid-sized companies added 33,000, while small businesses added 19,000.

But ADP’s report does not always accurately forecast employment data. As Reuters said on Tuesday, “It is a closely watched report but it often proves to be out of line with the government’s jobs numbers reported two days later, probably the most important U.S. economic indicator.” Last month’s job data was just one example of a missed prediction; in October the payroll processor projected private-sector job gains of 158,000, while the Labor Department gave the estimate of 184,000.a

ADP has made an attempt to rectify this image over the last two months by producing both October’s report and November’s report in conjunction with Moody’s. The company also used a different computer model and a larger sample of companies.

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