Playing around with employment data

Some back of the envelope calculations. The ADP employment report says private sector employment rose by 43,000 from September to October. The ADP numbers have consistently underestimated the BLS numbers for private sector employment all year. But it's more confusing than that: the ADP revises the previous month's numbers at the same time they report new estimates, so the change is from a revised estimate, not their initial estimate. That confuses the exercise of using the data to predict the BLS numbers, which also are computed relative to a revised estimate of the previous month's employment. So what if instead we try to predict the level of BLS employment from the level of ADP employment, then use that information to infer the change in BLS employment?

Ok, the first thing I find is that the ADP numbers on the level of employment are falling further and further below the BLS numbers.



Let's say that in October the trend continues, and ADP is 0.99 of the BLS private sector number. ADP private sector employment is reported at 107,056, so that implies a BLS number of 108,137. The BLS reports that in September private employment was 107,970 - this implies an increase in private sector employment of 167,000, before taking account of revisions.

But government employment has been falling. I've lost track of what's going on with the Census (I think all the temporary Census workers have been let go by now, but I don't know for sure), but the average monthly change in total government employment from February (before Census hiring) and September was -32,000. Therefore we get a total increase in payroll employment of +135,000.

Hmm, meanwhile the Institute for Supply Management's index of employment shows an acceleration of hiring in both manufacturing and services in October. I run a regression from January 2000 to September 2010 of the change in payroll employment on a constant and the ISM employment index for services and the index for manufacturing. I then forecast into October and I get.... drumroll please.... +133,000.

Ok, so two complete separate methods give me almost exactly the same result. I'm going to stop there before a third method gives me something completely different (specifically, I'll ignore this morning's initial claims numbers, which were not good), and place my bet:

Payroll employment for October up 134,000.