Goldman Sachs: ADP And Q3 Productivity Revision Weaker Than Expected

Kris Dawsey of Goldman Sachs Group Inc GS commented in a note to clients on Wednesday, December 3 that November's ADP employment was “a bit softer than expected” and that Q3 nonfarm productivity was revised up “slightly less than expected.”

ADP employment rose 208,000 in November, falling short of the 222,000 estimate analysts were looking for. October's upwards revision of three thousand to 233,000 was “minimal,” according to Dawsey.

Q3 Productivity growth was revised to 2.3 percent (from 2.0 percent), still short of the 2.4 percent estimate. Dawsey states that the upward revision was entirely due to stronger growth in nonfarm business sector output.

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“Over the past year, productivity grew a subdued 1.0 percent,” Dawsey wrote. “Unit labor costs – compensation divided by output – were revised to -1.0 percent (versus consensus of -0.2 percent). Lower unit labor costs reflected both a downward revision to compensation per hour (-1.0 percent to +1.3 percent) and stronger productivity growth.”

Dawsey adds that with the revised compensation Q2 and Q3 compensation per hour data, his wage tracker (weight average of the year-on-year growth rates of the employment cost index, average hourly earnings and compensation per hour with weights based on a principal components analysts) now stands at 2.3 percent.