Automatic Data Processing (ADP) is by far the largest processor of private sector paychecks in the country. This gives the company good insight into the number of jobs gained or lost by the economy. It is one of the key precursors to the big employment report due out on Friday morning.
ADP sees a decline of 254,000 jobs in September. While that is the smallest decline in their survey since July of 2008, it was far more than the 200,000 consensus expectation. In August, according to the ADP numbers the economy lost 277,000, and that number was revised down from 298,000.
In recent months however, the ADP report has been far more bearish than the report from the Labor Department has turned out to be. For example, according to the Labor Department the economy lost only 216,000 jobs in August. The consensus expectations are for the Labor Department to report a decline of 180,000 jobs in September.
There is actually a good chance that the number will come in better than that, but due entirely to some technical seasonal adjustment issues. Normally, the Labor Department adjusts the numbers to reflect all the college kids going back to school in September and thus quitting their summer jobs. This year there just were not that many summer jobs, so the adjustment could end up overstating things.
The losses in jobs according to ADP were spread out across the size spectrum, with small businesses shedding 100,000 jobs, medium sized (50 to 499 employees) dropping 93,000 and big businesses dropping 61,000. On a percentage basis however, the decline was actually larger for big businesses, since large firms only account for 16.5% of all private sector employment. Small business, on the other hand, makes up 44.4% of private sector jobs.
Goods-producing industries continue to be hit hard according to ADP, losing 151,000 jobs on the month — that is 0.8% of all goods-producing jobs lost in a single month. Service jobs are also falling, but at a slower rate, both absolutely and as a percentage, falling by 103,000, or by 0.1%.
Manufacturing was the key reason in the decline of goods-producing jobs, falling by 74,000, or 0.8%. Since April, manufacturing employment is down by 4.3%.
Jobs are one of the last things to turn around in the economy. We are still a ways away from actually adding jobs, but the reduction in the rate of decline in payrolls is a good first step. It is a long journey, though, since the population is growing, and we should be adding about 150,000 jobs just to keep up with population growth.
We have, using the government numbers, lost about 7 million jobs so far in this recession. If we were to get to the point where we were adding 150,000 jobs a month, it would take us almost four years for payrolls to climb back to where they were in November of 2007. That would not even put a dent in what we need to keep up with population growth.
From August of 2003 through December of 2007, the part of the last expansion where the economy was adding jobs, we only averaged growth of 142,500 private sector jobs a month, so a pace of 150,000 would actually be better than the “good part” of the last administration. A repeat of that pathetic performance will not be good enough.
After the last two recessions, we went through long periods of jobless recoveries where the economy was growing but payrolls were not. That seems likely to happen again, and there is a very real possibility that we will not see a new high in total employment until 2015 or 2016.
The big question then is, what happens to all those people who are left unemployed, more or less permanently? Do they starve, or turn to crime? Or will there be some sort of safety net for them?
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