January Employment Figures: Significant Gap Between ADP Data and Non-Farm Payroll Report

January employment figures reveal an interesting pattern, with ADP data projected to experience a significant slowdown of 30,000, down from a gain of 41,000 in December. Meanwhile, nonfarm payrolls are expected to reach 85,000, creating a substantial gap between these two economic metrics.

Six-Month Trend Reveals ADP Underperformance Pattern

Analysis of the previous six months shows that ADP data consistently underperformed compared to nonfarm figures, with an average difference of 22,000. Although the gap narrowed in September and November, it is projected to widen significantly to 50,000 in January. This phenomenon indicates that ADP data and nonfarm reports have different sensitivities to labor market conditions.

Gap Expected to Widen to 50,000 in January

Continuum Economics, through North American Senior Economist Dave Sloan, estimates that this divergence will peak in January. The 50,000 difference is much larger than the six-month average, suggesting that certain factors are exerting asymmetric impacts on the two data sources. Nonfarm figures are expected to recover from recent weakness in the retail sector, while ADP metrics do not capture this recovery effect with the same intensity.

Sector Differences: Construction vs. Services Dynamics

January ADP data shows moderate improvement in the goods-producing sector, particularly in construction. However, growth in the services sector is projected to slow, contributing significantly to the gap with nonfarm data. The most notable discrepancy appears in education and health industries, where ADP figures show much weaker performance compared to nonfarm payrolls.

This consistent pattern indicates that market observers need to critically consider both data sources when analyzing employment figures, as each metric has advantages and limitations in capturing the complex dynamics of the labor market.