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October's ADP Employment Report Fell Below Expectations

by Dr. Malio West, CMA, PMP

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By Global Accounting and Global Accounting Team |  Nov 4, 2020 11:25 AM EST
 

Wednesday morning before the opening bell, the ADP National Employment Report (NER) was released. It indicated a gain of 365,000 jobs in private-sector, seasonally adjusted payrolls for the month of October, well below expectations for an increase of 650,000 jobs.
 

Marginally offsetting October's weak results, September's ADP report saw an upward revision, now indicating that the economy added 753,000 jobs last month, up from a gain of 749,000 jobs previously reported. August's reading was also revised higher to indicate a gain of 482,000 jobs versus a gain of 481,000 previously reported.

 

 

The headline reading can be further broken down into a "goods-producing" sector and a "service-providing" sector. The goods-producing sector added 17,000 jobs last month while the service-providing sector added 348,000 jobs.

 

Within the goods-producing sector, there were 7,000 jobs added in Manufacturing, 7,000 jobs added in Construction, and 3,000 jobs added in Natural Resources & Mining.

 

In the service-providing sector, we saw job gains led by Leisure & Hospitality (+125,000); Education & Health (+79,000); Professional & Business (+60,000); Trade, Transportation & Utilities (+53,000); Other Services (+23,000); and Financial Activities (+6,000). The Information sector so no change in October.

 

 

By business size, small businesses (1 to 49 employees) added 114,000 jobs, while midsize businesses (50 to 499 employees) added 135,000 workers, and large businesses (500+ employees) added back 116,000 jobs in October.

 

 

Commenting on the results, Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, stated: "The labor market continues to add jobs, yet at a slower pace. Although the pace is slower, we've seen employment gains across all industries and sizes."

 

Remember, this report comes ahead of the Labor Department's release of nonfarm payroll numbers this Thursday at 8:30 a.m. ET, where we will be looking for a gain of 600,000 jobs. While the two reports are based on slightly different sources (ADP does not include government jobs, for example), the two readings do have a general tendency to illustrate the same trend as we can see in the chart below.

 

 

Bottom line, this was not a great report, however, while it came in well below expectations, the economy is still heading in the right direction and adding back jobs, albeit at a slower pace that we had hoped for. That said, while the election remains front and center, the path of the recovery will ultimately be determined by our ability to combat the coronavirus and as a result, though it isn't getting the headline coverage it normally does today given the election, it remains a key area of focus and will become the story once more when the election results are finalized.

 

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Dr. Malio West, CMA, PMP

Dr. West is a US Navy Veteran that served during Desert Shield/Desert Storm in Kuwait City. After the US Navy, Dr. West spent time in Singapore, Tokyo, Auckland, and Hong Kong working in international accounting focused on the financial services industry, at an executive level.

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