Friday, July 8, 2011

More on the ADP/BLS discrepancy in jobs reports for June

Global Economic Intersection (GEI) provides some insight into the discrepancy between ADP and BLS numbers for June.  GEI says ADP and BLS numbers correlate closely accept during periods of major turning points in the economy when BLS departs, sometimes sharply from  ADP.  After the turn, BLS returns to tracking with ADP.  GEI notes:

Econintersect believes the simplistic sampling extrapolation technique of ADP yields a far better picture of the employment situation than the complicated, convoluted Bureau of Labor Statistics (BLS) methodology.

Because of the differences in methodology, many pundits ignore the ADP numbers – while waiting for the BLS numbers.  Although there can be a low correlation in a particular month, the different methodologies tend to balance out, and the correlations are excellent outside of the data turning points.  We are now 15 months past the post recession turning point in employment.

The following chart by GEI compares ADP and BLS reports on Non-Farm Private job growth/decline since January 2010.

The next GEI chart shows how ADP and BLS numbers have correlated over a much longer period.

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