ADP: 522k Jobs Lost In January, Official BLS Jobs Report Friday

Today, ADP, a provider of payroll services to more than 24 million Americans employed in the private sector, released their monthly jobs data which showed that the economy lost 522,000 jobs in January. The expectations were for a loss of 535,000 jobs. Despite drawing from data based on 399,000 business representing about 24 million people on payrolls, ADP reports were way off most of 2008 relative to the official government jobs report produced by the Bureau of Labor Statistics. For example, November ADP showed -250,000 jobsthen a few days later November BLS showed -533,000 jobs.

But December was closer with the ADP report showing -693k jobs and the BLS report showing -524k jobs as a preliminary number. That number will be revised when the January numbers are released this Friday, and January’s estimate is for -500k which is also in line with January ADP. The WSJ’s Real Time Economics blog had some good comments today on ADP vs BLS jobs data:

The ADP report doesn’t include public-sector jobs, but even comparing it to the Labor Department’s private-sector numbers, it has had a spotty history tracking the government figures. The number was relatively close through much of last year, but as job losses heated up in the fall, the discrepancy to official numbers grew. The comparison is made more complicated by a major change ADP made last month to try to get its figure more closely aligned to government data.

ADP and Macroeconomic Advisers used to extrapolate the numbers from ADP’s own data as on the payrolls it services, but last month the methodology was changed. “This was the second month of a revised ADP Employment Report, which incorporates jobless claims and other labor market information and has hence moved to being a forecast of the payroll employment report rather than an independent read on the labor market,” Goldman Sachs economists said. However, last month ADP said the private sector lost 659,000 jobs, but the government reported just a 531,000 drop in the private sector. The public sector added jobs last month, and is expected to add jobs again in January.

BLS estimates also call for unemployment to go from 7.2% to 7.5%. Some economic estimates call for an unemployment rate of 9% in the next 1-2 years. The jobs report has a large impact on markets, and mortgage rates always move on this report since it’s such a broad measure of the economy, covering consumer strength, unemployment and wage inflation. The economy lost 2.6m jobs in 2008.

WHEN IS BOTTOM FOR RATES?
Rates dropped 1.25% to about 5.125% since the Fed announced that it would buy $500b in mortgage bonds in the coming months. The announcement came pre-Thanksgiving and buying started January 5. Fed buying has so far focused on higher coupons that don’t actually bring rates down on the coupons lenders use to create rate pricing. Friday’s jobs report will capture post-holiday retail company layoffs, and barring any unforeseen stimulus from the forthcoming packages out of Washington, current levels (about 5.25% zero points on conforming 30yr fixed) could possibly be the bottom for rates.