ADP Goes Back to the Drawing Board

ADP has put together a fairly miserable track record in forecasting BLS job data. This month, they have, once again, revamped their methodology in an attempt to more closely track BLS data, which they claim after the BLS revisions one year later their data will match up.

Why? Why is that goal is even remotely desirable?

ADP has their own proprietary data sources; they track employees (new and existing), they can track payroll dollars (total gains and losses, and per employee changes), off of the actual payroll checks going to employees. Why try to imitate the BLS output each month? ADP can create a very specific set of reports that ARE PURELY DRIVEN BY THEIR OWN PAYROLL RECEIPTS, that stands on its own.

Why even bother messing around with trying to imitate or forecast BLS data?

The BLS Non-Farm Payroll numbers are somewhat flawed, subject to massive revisions, and fatally flawed due to how the Birth Death adjustment has been applied.

If ADP wants to contribute something valuable, they should stop trying to forecast BLS, and instead generate their own, proprietary, data driven monthly NFP numbers.

Consider how NFP lags the end of recessions, continuing to be negative long after the recovery begins. Employers often expand output without new hiring: They offer full time employment to part–time workers, and offer overtime to full timers. ADP can track that, and capture a real time improvement in the economy long before it shows up in the BLS data.

Inquiring minds want to know: Why bother aping a data series that is not particularly helpful in real time?


via Barron’s Econoday


ADP Reports 693,000 Private-Sector Jobs Lost in December
January 7, 2009, 8:28 am

U.S. Economy: Companies Cut Payrolls at Faster Pace in December
Bob Willis and Courtney Schlisserman
Bloomberg, Jan. 7 2008

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