The highlight of yesterday’s North American economic data was the ADP National Employment Report for the month of May. It showed that the total employment change in the US nonfarm private business sector declined by 2.76 million – much better than the 9 million drop anticipated by economists.
As always, traders use the ADP private business sector data to prepare for the upcoming NFP release. Since the ADP is released every month only two days ahead of the NFP, it often gives an educated guess about the all-important NFP numbers.
May 2020 ADP Report in Numbers
The ADP is a measure of private employment derived from anonymous payroll data of client companies served by the ADP. As a result of this, it is often viewed as a second-tier employment data when compared with the NFP. Nevertheless, it offers a clue about possible structural shifts in the US jobs market and represents a benchmark for the NFP.
During the month of May, the coronavirus pandemic continued to pose a threat to businesses of all sizes. However, when compared with the start of the crisis, where the most affected were small businesses, this month sees large companies dominating the drop in employment ranking.
For instance, companies with over a thousand employees saw a dramatic decrease in the employment numbers, when compared with very small and small businesses.
Another interesting development this month in the private sector is the comparison between the goods-producing (manufacturing) and service-providing sectors. The latter is responsible for more than twice the employment lost (1.967 vs. 0.794), indicating the struggles the service sector in the United States is facing. Considering that the United States has a service-based economy, the impact on the US GDP is yet to be seen in the period ahead.
Trade, transportation, and utility services lead the loss of jobs in the services sector, closely followed by information and financial activities. As for the goods-producing sector, manufacturing and natural resources are on top of the list.
Despite the bleak numbers, the forecast for the release was much worse. As it came better than the initial expectations, the hope is that April may have marked a bottom for the private sector businesses, and job loss likely peaked that month.
As many states began a phased reopening of businesses, we may see a similar bounce on the NFP release tomorrow.