January Data Shows Growing Divergence Between ADP and Non-Farm Employment

According to the analysis by Continuum Economics, referenced by Odaily, January employment indicators reveal distinct patterns between two major U.S. labor market metrics. The institution’s senior economist, Dave Sloan, anticipates figures that will expose the historical differences between these two metrics, with implications for understanding the overall economic landscape.

ADP Projects Cooling in Hiring

Projections indicate a growth of 30,000 jobs in the ADP data for January, representing a decrease compared to the 41,000 recorded in December. This slowdown aligns with a pattern observed over the past six months, during which ADP values were on average 22,000 points below non-farm employment. Although the gap narrowed in September and November, it is expected to widen again in January, reaching approximately 50,000.

Non-Farm Employment Signals Stronger Recovery

Meanwhile, the non-farm employment segment projects a more vigorous increase of 85,000 jobs, highlighting the structural divergence between the two indicators. This expected recovery partly reflects the rebound of the retail sector, which has less influence on ADP data. The systematic difference between the two metrics became more noticeable when, in December, ADP numbers approached non-farm figures, creating expectations of convergence that January is likely to contradict.

Construction and Services Sectors Explain Variations

Sector analysis shows that the most pronounced discrepancies are concentrated in the services segment, particularly in education and health. For January, a slight increase is projected in the productive sectors, especially construction, while growth in services may slow down. These differing sector trends explain why ADP data often fails to capture the same magnitude of job creation as the non-farm indicator, demonstrating how economic composition influences the divergence observed between the two indices.