So once again we commence the countdown to the most overrated economic number of the month, non-farm payrolls. Never mind that the standard error on the NFP number is often larger than the actual monthly change in payrolls, pundits and traders alike will be watching closely. That’s not to say that the number isn’t important but that we should pay more attention to the trend, not the month to month fluctuations. Wednesday’s ADP report estimated 91,000 private sector jobs were added in the month of August. The 3 month moving average is running at 115k, down from the peak of 214k in February this year.
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While the ADP report doesn’t have a good track record for predicting the monthly changes in the NFP report, over longer time frames the correlation is strong. The trend over the last few months is clear, payroll growth has slowed and will likely continue to deteriorate through the end of the year.