ADP Reworks Monthly Private Jobs Report

October 24, 2012

A monthly reading of U.S. private sector employment has been revamped to put it more in line with the closely watched government nonfarm payrolls report.

Automatic Data Processing said on Wednesday it had made the changes to its private job market report as part of a new partnership with Moody’s Analytics.

ADP’s figures are typically released a couple days ahead of the government’s report. While economists use the report to fine-tune their labor market forecasts, ADP has had a spotty track record of predicting the initial reading for non-farm payrolls.

The report will use a larger sample size and new methodology to put it more in line with the final revised readings from the Bureau of Labor Statistics.

“We’re going to be very accurate. We’re going to nail this number,” said Mark Zandi, chief economist at Moody’s Analytics.

The report will now be based on 406,000 companies, up from 344,000 previously, which will take into account 23 million employees, up from 21 million. That will capture more than 20 percent of all Americans employed in the corporate sector.

Testing the new model on data going back to 2001 showed a 96 percent correlation with the revised government figures, according to ADP.

The report will also be broken out into more industry categories and business sizes than before.

[ADP said the enhanced report will provide an expanded snapshot of the monthly change in nonfarm private sector employment by moving from reporting on three industries to five industries. The five industries reported constitute more than 50 percent of all U.S. private sector employment. The industries are aligned with the North American Industrial Classification System (NAICS), the system endorsed by the U.S. Bureau of Labor Statistics. The five industries are construction; financial activities; manufacturing; professional and business services; and trade, transportation and utilities.]

The changes will be in effect as of ADP’S employment report for October, which will be released Nov 1.

The overhaul was the result of an internal project to improve the report that was started a year ago, Jan Siegmund, chief strategy officer at ADP, said. It also marked the end of ADP’s partnership with Macroeconomic Advisors, which co-developed the report.

(Reporting by Leah Schnurr)

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