The ADP jobs number came in at +139K, an acceleration from the 127K of the prior month.

On a year over year basis, the ADP jobs figure represents an increase of 1.9% over February 2013.

adp jobs gains

ADP jobs relation with BLS job

What do today’s ADP jobs figures mean for Friday’s huge BLS’ job report?

Here’s how the relationship looks.

The scatterplot shows that the two surveys are closely related, with only a slight bent rightward from a perfect linear correlation.

Based upon the relationship, what would today’s ADP +139K number predict for Friday’s BLS job number?

145K.

adp bls

Friday’s job number falls below expectations

The +145K is in contrast to market expectations of +170K.  In other words, it’s highly unlikely that Friday’s job number will reach analysts’ expectations.

What about something beyond a simple linear regression?

The following is a simple dynamic regression predicting what Friday’s BLS number will be.

The regression includes the 3-day preceding ADP number, a constant, an autoregressive term, and the sixth month lag of the BLS number.

All coefficients are strongly statistically significant, as would be expected.

dynamic regression

Here’s what the prediction for this model would be for Friday’s BLS job number.

With 95% confidence, the ADP jobs number predicts a BLS jobs number of between 137.522 million and 137.789 million, or between +23K and +290K.  Not very useful, as one would likely expect with such numbers.

forecast

If one lowers one’s confidence interval to just 60% (reasonable by Wall Street standards), the point forecast comes out to +156K, with a range of +136K and +177K.

sixty percent forecast

Bottom line: the consensus forecast of +170K is on the very high end of what is likely to happen.

More detail on ADP Job numbers

Here’s some more detail on today’s ADP jobs numbers.

The top line number came in at +139K, made up of:

  • Large firms (over 500 employees), which added 44.5K jobs;
  • Small firms (1 to 49 employees) added 59.5K; and
  • Mid-size firms added 35.4K, down from 49.3K in January.

adp job gains by firm size

On a sector level, the ADP jobs numbers came in at:

  • Professional & Business Services at +33.3K;
  • Transportation/Utilities at +31.4K;
  • Construction at +13.7K;
  • Manufacturing at +1.5K; and
  • Financial Services at -1.6K, the sole decliner of the group.

adp job gains by sector

Overall, the private sector job gains from ADP were relatively positive, equating to a predicted BLS jobs figure of around +145K to 155K, much less than the +170K the market currently expects.

The real question is how negatively or positively will the market react to a jobs number that’s well short of expectations?  With taper concerns, for the short-term, off the table of concerns, a historically accurate guess would be negatively.