ADP Shows Massive Beat, BLS Next?

While the ADP employment report showed slightly slower growth in February that January, the February number crushed expectations.

Private-sector employment gained 198,000 private jobs in February. Economists expected the report to show a gain of between 170,000 - 175,000 private-sector jobs.

January’s readings were also revised higher to 215,000 private jobs, compared with a prior estimate of 192,000, payrolls. Job creation was spread evenly throughout businesses of different size; ADP reported that small businesses added 77,000 private jobs in February, medium businesses added 65,000 private jobs, and large businesses added 57,000 private jobs.

By sector, service-providing employers added 164,000 private jobs in February, while goods producers added 34,000 private jobs.

Including revisions, this is now the 9^th month the ADP report has beat consensus estimates and has averaged roughly 180,000 jobs per month in that time.

In comparison, after revisions, the BLS report has managed to exceed analyst expectations for the last 7 months.

It’s worth noting that the BLS reports peaked in March last year at 240,000 jobs added (February 2012 reading) and then saw sharp declines in April, May, June and July. The report also missed expectations in those months (average jobs added were below 100K) and growth fell to a low of 64,000 in July’s report.

Friday’s BLS nonfarm-payroll employment report is expected to show 160,000 jobs added in February, about the same as a gain of the 157,000 jobs in January. Economists also expect that the unemployment rate will remain unchanged at 7.9%.

What are your predictions for Friday and beyond?

Given that February seems to be a good month, what are your predictions for Friday’s reading? Let me know what you think will happen to employment growth from March to June:

A) BLS report shows greater than 175,000 jobs and the unemployment rate drops to 7.8% or below

B) BLS report shows 165k- 175k jobs added and the unemployment rate drops

C) BLS report comes in line with 160-165k with no change in rate

D) BLS report misses small and unemployment stays the same

E) BLS report misses, shows less than 150k and unemployment rises

F) Other

Don’t forget to clarify your answer and tell us where you think jobs go in the next four months following this report.

I am in the “B” camp; I think there will be a small beat, but another drop in the participation rate which will artificially lower the unemployment rate. Moving forward, I think that the BLS reports will show the same pattern as last year and job growth will slow to an average of 100k over the following 4 months.