Unemployment lineThere's no question Wednesday's reading on nonfarm private payrolls growth was an absolute blowout. ADP (ADP), the payroll processing company, said a record 297,000 jobs were added in December, nearly triple Wall Street's forecast. But before we pop the champagne corks in anticipation of the Labor Department's monthly jobs report Friday, it's important to remember that the ADP figure could be horribly wrong.

For one thing, ADP excludes government jobs. It's also notoriously volatile and has a history of big misses in forecasting the official number. (Economists, on average, expect Friday's report to show an increase of 140,000 jobs with the unemployment rate ticking down to 9.7% from 9.8%.)

Can Jobs Really Outpace GDP?

But perhaps most important is that Wednesday's ADP report just doesn't jibe with other recent data points -- or the pace of the economic recovery. As Peter Boockvar, equity strategist at Miller Tabak & Co., noted Wednesday, the ADP figure doesn't much square with this week's readings from the Institute of Supply Management on manufacturing or services, both of which showed declines in their respective employment components.

Even more curious is that the pace of economic growth doesn't support a record figure from ADP at all, writes David Rosenberg, the presciently bearish chief economist and strategist at Gluskin Sheff. "We never had [an ADP] number remotely this strong during the last economic cycle," Rosenberg told clients Wednesday. "[The] last time we were close was in February 2006 when real GDP growth was 5.4% at an annual rate."

Real gross domestic product came in at an annual rate of just 2.6% in the third quarter, according to the Commerce Department, and it's not expected to approach 5.4% anytime this year. "Even the most bullish forecast for [fourth quarter GDP] is 4%, consensus is at 2.5%," Rosenberg notes. "So either we have something on our hands that is much stronger than that or productivity is starting to sag. Or this number is BS. Take your pick."

"A 1-in-10 Event"

The ADP figure was led by huge gains in services, especially in small and midsize companies. Rosenberg suspects the better-than-expected holiday shopping season was responsible for the (likely temporary) lift.

More troubling is that financial services -- which account of 8% of total private payrolls -- declined. That makes the odds of a similar blowout on Friday long, indeed. There have been 111 times when monthly private sector service payrolls rose by 200,000 or more going back to 1940, Rosenberg writes. Of those 111 times, only 11 were coincident with the financial sector shedding jobs.

"In other words, for the nonfarm payroll report to match what we saw in ADP would be a 1-in-10 event," Rosenberg says. Don't be surprised if Wednesday's shockingly good numbers fail to repeat themselves when the federal government weighs in Friday.


Increase your money and finance knowledge from home

How much house can I afford

Home buying 101, evaluating one of your most important financial decisions.

View Course »

Intro to Retirement

Get started early planning for your long term future.

View Course »

Add a Comment

*0 / 3000 Character Maximum

41 Comments

Filter by:
sdwcorp

What happens to the Jobs that are filled after the 2.5 Million people start to collect Social Security. Some keep working some work part time , However, What about the people who actually retire or leave their jobs and start a small Buisness .Some of the jobs may not be filled. The possibilities are endless.Within all of this it is not possiable to determine what effect this has on the Job numbers or any statistics .In conclusion ,279,000 New jobs may or may not be new jobs ,it might be accurate to say Hiring in Dec totalled 279,000 as it is impossiable to caculate where these jobs come from .Hopfully there will be more discussion on this opinion as well as Mr Burrows comments. Stephen Weimar

January 13 2011 at 8:11 AM Report abuse rate up rate down Reply
llwlknsn

I keep sending out resumes for jobs that I am more than qualified and I have seen no results. When I talk to hiring managers about what I need to get the job, I am told that they are being swamped by 300 to 600 applicants for one job. I have degrees in Physics and Math. Think about that. I don't need more 'education' I need a job. This report is more smoke to cover the destruction of the social contract that has balanced the needs of American business and labor for over two hundred years. The next time businesses scream about taxes in this country being too high, yell back outsourcing and Irish Sandwich. It is messed up.

January 06 2011 at 3:17 PM Report abuse rate up rate down Reply
1 reply to llwlknsn's comment
bluewaterman5

Good Luck in your job search.

January 07 2011 at 11:53 AM Report abuse +1 rate up rate down Reply
toosmart4u

ADT's report is just a guess. There are a bunch of outfits that "guess" all the time.

January 06 2011 at 7:56 AM Report abuse rate up rate down Reply
2 replies to toosmart4u's comment
itacurubi

Well ... in English, we distinguish estimates and guesses: the ADP number is an instance on the latter. Unlike the former, it is derived from data not simply a finger to the wind or gut feel or a deduction from some ideological maxim.

January 06 2011 at 8:44 AM Report abuse rate up rate down Reply
wfreeberg

You have to accept that they were also guessing when they reported jobs lost. It pretty much evens itself out.

January 06 2011 at 10:31 AM Report abuse rate up rate down Reply
ginsur5384

Dan,
Sounds like you're another Republican that can't stand to hear that the economy is improving. Stop reporting on the economy if you have an agenda, it's obvious and not credible. Go back to Womens Wear Daily, you are much better suited for that level of reporting.

January 06 2011 at 7:49 AM Report abuse +1 rate up rate down Reply
swkoppy

Remember the government lies all the time to all of us.I'm in new Yrok state and we have a 10 billion hole this year and a projected hole of 18 to 20 billion for next year.They have already announced that 10's of thousand of state workers are going to get laid off here this year and everyone else get a salary freeze and pays more out of there check for everything.Things are getting alot worse here fast and they tell us that on the news.Unemployment in the country is really 20% and there are 25 foreclosures very close to me and people still loosing there jobs everyday and there are no jobs to go to as all bussiness have hiring freezes.Yes there are some $8 an hr jobs that pay less than unemployment,but at that pay or even on unemployment you still lose everything in 12 months or less.So much for having 6 months backup in the bank.Thats gone.No one can pay there bills if they don't have a job and it doesn't matter what your bills are.-------------aaahhhh yes they saved the banks and did nothing for us and stuck us with the bill.Now the banks are vultures and picking at the little the middle class has left.It's no wonder alot of people wait to the last second and file Bankruptcy and stick it to the banks as the bamks will not budge as to interest rates or payments ,but oh remember they wereall bankrupt and we saved them,but can't get the same respect.--IT'S DISGUSTING,

January 06 2011 at 7:18 AM Report abuse +3 rate up rate down Reply
S321Saint

Remember folks...when its a liberal in the White House, everything they do must be cheered, must be made to be as positive as possible--reality be da#ned. Anything negative should be ignored or when possible blamed on the last conservative occupant of the White House...

January 06 2011 at 7:14 AM Report abuse +2 rate up rate down Reply
Mr. P

i live in ATL, GA but i'am from Michigan. why not GA, don't have deposit on bottles and coke cans. i think it would make a big different. You wouldn't see any type of bottles or cans on the side of the roads. Plus i think GA can make huge change cash in on deposit of bottles and cans, the money will be in GA, and maybe a little tax will not hurt GA people. also the deposit on each bottles and cans will be 5cent, 10cent, 20cent 25cent,. it depend on size of bottles and cans. it wouldn't hurt to give it a try. THANK YOU . my email is artp1960@aol.com

January 06 2011 at 12:26 AM Report abuse +1 rate up rate down Reply
rskillsta

Unlike the last Great Depression, this one started with America having too many jobs sent to China to hinder even the possibility of a real economic recovery. But that's okay with secret anti-Americans Australian Rupert Murdoch and his Chinese wife Wendi Deng.

January 06 2011 at 12:13 AM Report abuse +2 rate up rate down Reply
pj512

I guess I'm still a little confused. I have been unemployed for a year now. For the first nine or ten months there were quite a few jobs listed that I was qualified for (and apparently a lot of other people). Now, there are just a very, very few. I'm 57 and I honestly believe that I will hit early retirement age before I find a job. I haven't given up, but I'm so discouraged it's not funny. I'm renting my house out and moving in with my brother because I've run out of money. Thanks, America, for looking after the people who have worked the hardest.

January 05 2011 at 10:25 PM Report abuse +6 rate up rate down Reply
2 replies to pj512's comment
Iselin007

This all will come to war and riots.

January 06 2011 at 3:48 AM Report abuse +3 rate up rate down Reply
llwlknsn

You are not alone.

January 06 2011 at 3:20 PM Report abuse rate up rate down Reply
fameter8th

There once was a nation called America,
A dream and idea for all,
We all had a chance for happiness,
A fair proposition for all.

But along came the lobbyist,
with offers for congress, one and all,
Said lobbyist to the congress,
"with our dollars we can have it all!"
So congress said "sounds good"
We'll take your dollars and tell us what to do,

So after congress did their bidding,
Democracy began to fall,
The dream was now dying along
with fairness for all.
Now the happiness opportunity has been ruined,
Its all to just survive we are doing,
May god have mercy on us all.

January 05 2011 at 9:23 PM Report abuse +7 rate up rate down Reply