Thursday, 6 November 2008

ADP Report Suggests Big Drop in October NFP's

The ADP report seemingly caught up with the BLS numbers in October, showing a drop of -157k in US payrolls. As mentioned numerous times, the ADP report has been a poor proxy for the BLS numbers to be released on Friday. In fact the the ADP report overstated payroll numbers by an average of about 80k for each of the past 3 months. For me the following pasage was the key take away from the ADP report:

Employment among small-size businesses, defined as those with fewer than 50 workers, declined 25,000.This is the first outright decline in small business employment reported by the ADP Report since November of 2002, and the largest percentage decline since the economy was emerging from recession in early 2002.

As we have so often been reminded throughout the presidential campaign small business is the driver of US employment growth and now that they laying workers off in large numbers, we can expect a string of very bad employment reports through the end of next year and into next.

The consensus is looking for a loss in NFP's on Friday of about -200k, as usual it could be 100k in either direction around that estimate. However it seems likely that it will be an ugly number.