ADP: Payrolls Fell 254K in September

The ADP report came in well below consensus expectations as payrolls are projected to decline 254,000 in September compared to a forecast of a decline of only 200,000.

However, even though the report missed expectations, the projections show a continued weakening in payroll declines. For the sixth consecutive month, the decline in payrolls has been less than the previous month.

Unfortunately, the speed of the change in payroll declines has slowed and looks to be leveling off. This drop-off in payroll declines correlates well with the unemployment claims report as initial claims are still hovering above 500,000 per week and continuing claims are holding steady above 6.1 million.

Using this relationship, the ADP report seems to be signaling a continuing increase in the unemployment rate for the near future.

Broken down, the September data showed manufacturing employment fell by 74,000 jobs, goods-producing sector employment declined by 151,000 jobs, the service-providing sector employment lost 103,000 jobs, and the construction sector shed 73,000 jobs.

The ADP employment report provides the market with an advance preview of Friday's BLS employment numbers. However, between the end of 2007 and the beginning of 2009, the ADP report did not follow closely with the actual unemployment rate. ADP recalculated their report, and instead of providing hard data from ADP clients, the report is now a forecast of the BLS payroll using the hard data along with some general macroeconomic variables.