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Private payrolls grow less than expected

Sabri Ben-Achour Aug 31, 2022
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Job changers enjoyed a significantly higher pay increase than job stayers, according to ADP, meaning it pays to switch in this economy. Above, job seekers meet with recruiters during a career fair. Justin Sullivan/Getty Images

Private payrolls grow less than expected

Sabri Ben-Achour Aug 31, 2022
Heard on:
Job changers enjoyed a significantly higher pay increase than job stayers, according to ADP, meaning it pays to switch in this economy. Above, job seekers meet with recruiters during a career fair. Justin Sullivan/Getty Images
HTML EMBED:
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Our focus on jobs this week marches on. Tuesday we told you about the number of job openings in this economy. On Friday we’ll have the national jobs report from the Labor Department.

On Wednesday it was the ADP private payroll report, yet another measure of how many jobs were added to the U.S. economy. For August, the number is 132,000. That’s less than economists were expecting, according to surveys, which suggests, maybe, that the job market is leveling off.

Keen observers will notice it’s been a while since we told you about the ADP payroll estimate. That’s because it’s been a while since Automated Data Processing Inc. issued one. ADP put the whole thing on hold back in May to revamp it.

There’s more than one way to count the number of jobs in the economy.  

“The way the government numbers are constructed is the government calls a whole bunch of companies and says, ‘What happened to employment last month?'” explained Justin Wolfers, a professor of economics at the University of Michigan.

ADP doesn’t have to call companies, companies just tell it. ADP takes care of payrolls for businesses and has numbers from 25 million workers.  

“They’re processing your check, they know if you worked last week, they know whether a large chunk of Americans worked last week,” Wolfers said.

In the past, ADP used this knowledge combined with government jobs data to predict the next government tally of jobs in the economy. 

“And it didn’t do a very good job of that,” said Michael Ashton with investment management firm Enduring Investments. “I mean, sometimes it would go the wrong direction.”

Part of the issue is that ADP was thrown off by government data that could be pretty volatile. So, ADP changed its whole system to better use its own massive data set. 

Erik Brynjolfsson is director of the Stanford Digital Economy Lab, which helped ADP revamp its methodology.

“The goal is no longer to simply forecast the [Bureau of Labor Statistics], but rather to provide an independent, separate measure of the U.S. labor market,” he said.

It breaks down job data by industry and business size and tracks wages, tips and bonuses. 

Julia Pollak, chief economist at ZipRecruiter, said the wage information is especially valuable because it follows the same people over time. There is, for example, this nugget in Wednesday’s report:

“The median change in annual pay for job stayers was 7.6%, but among job changers it’s huge: 16.1%,” Pollak said.

Meaning it literally pays to switch jobs in this economy. But that may not be the case for too much longer.  

“The report suggests that job growth is slowing, that companies are adjusting their future hiring plans downward a little bit,” she said.

So overall, the new ADP report is another, now sharper, lens on what’s happening in the economy.  

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