ADP Signals Weak Job Report Friday

ADP released their monthly employment report this morning that can in a bit weaker than expected.   Before we get into the report it is important to remember that with the ADP report an individual only had to work ONE hour within the given reporting period to be counted as employed.   The month of January showed an increase of 170,000 new jobs versus expectations of 182,000.  However, what was surprising in the report was the revision of last months steller 325,000 job increase to just 292,000. 

Furthermore, the January number, which is likely to be revised lower in the March release, was the lowest number since this past October post the economic malaise of the summer debt ceiling/downgrade showdown. However, here is what is important.  As you can see by the chart above there is a fairly high correlation between the monthly net change in employment between the ADP report and the BLS report that we will see on Friday.  The 122,000 job decline between Decembers revised number and January's release signals that we could very likely see a similar decline in job creation in Friday's BLS report.

My friend Tyler Durden at ZeroHedge pointed out this very interesting bit of data:

"Stone & McCarthy (SMRA) point out a disturbing trend of sizable forecasting errors for the January payroll print with 7 straight years of estimates overshooting by an average of 64k - strangely consistent post the BLS switch to a probability-based sample. But its not just forecasting error, TrimTabs ...