Economist Calls U.S. ADP Employment Report "Grossly Over-Optimistic"
Following the release of the ADP private employment report on Wednesday, which posted a gain of 9k jobs in July, economists dismissed the figures as overly optimistic and predicted they won't be reflected in the BLS nonfarm payrolls survey on Friday.
Senior U.S. economist Paul Ashworth from Capital Economics said "all the other employment indicators we track have continued to deteriorate, so we suspect that the ADP survey may just have returned to its grossly over-optimistic ways."
The reported boost was driven by growth in the service sector, which saw an advance of 74k jobs, while jobs in the goods producing sector fell 65k and manufacturing pulled back 49k. Economists were expecting the report to show losses of 60k jobs in the month.
Abiel Reinhart, senior U.S. economist at JPMorgan, is looking for a decline of 85k jobs in the nonfarm payrolls report, and he said Wednesday's ADP report offers no reason to change that forecast. He said the ADP report has overshot the BLS numbers in each of the past eight months by an average of 81k, showing only two negative prints in 2008 compared to consecutive declines in the BLS numbers.
At most, he said the report "decreases the chances of a spectacularly weak survey" in nonfarm payrolls.
HFE chief U.S. economist Ian Shepherdson said "it is very unlikely that this report will be reflected in the official payroll numbers on Friday." He called the ADP survey "very noisy" and said the bottom line is that employment is heading downwards while the unemployment rate is moving up.
Speaking on CNBC, Joel Prakken, chairman of Macroeconomic Advisors and spokesperson for the report, characterized the figures as a "weak report," while the report emphasized that the three-month average is at -14k.
The report noted that employment in the construction sector declined 16k in July, marking the 20th consecutive monthly decline. In the financial sector, employment rose 4k during in the month.
As of Wednesday morning, the consensus was looking for a decline of 75k jobs in Friday's nonfarm payrolls report.
By Patrick McGee and edited by Nancy Girgis