Distorted Employment Indicators

The US labor market is improving, but not as rapidly as suggested by some of the numbers released last week. The ADP survey of private payrolls showed a gain of 325,000 during December, while the official BLS survey found a gain of 200,000 during the month, with private payrolls up 212,000 and government employment down 12,000. While these numbers are seasonally adjusted, they might have been boosted by some seasonal distortions:

(1) The ADP data for the month of December are notoriously volatile. Unlike in the official BLS employment report, employees of ADP's clients typically remain on payroll records until December whether still employed or not, with those no longer employed subsequently removed from the records at the end of the year. Difficulties adjusting for this sizeable seasonal movement have the potential to distort the December ADP employment numbers.

(2) Transportation and warehouse payrolls are also volatile now at year ends. They jumped 50,200 during December, accounting for 24% of the increase in private payrolls. Last year, they jumped during December by 50,100, but then dropped 47,200 during January. (More for subscribers.)