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(CEP News) - The ADP private employment report is expected to show a loss of 20K jobs in June's survey on Wednesday, following three months of unexpected gains. The recent surprises contributed to a wide variety of forecasts this month, ranging from -90k to +50k jobs.
The ADP employment report is the primary tool used to forecast BLS nonfarm payrolls in the United States, yet in recent months, the two surveys have been reporting different trends. Roger Bootle, managing director of Capital Economics, said ADP "should be one of the best guides to the official employment report and so cannot be ignored completely, but in practice its short track record has more misses than hits." The ADP report has shown net gains in four of the past five months, including a gain of 40k jobs last month, 13k in April, and 3k in March. In sharp contrast, the payrolls survey in 2008 has reported consistent declines totalling 324k net losses. Abiel Reinhart, U.S. economist at JPMorgan Chase, said the ADP figures have overshot the payrolls report in each of the past seven months by an average of 91k, noting the closest call was 39k too high and the largest miss was 129k. Reinhart said the ADP survey is not designed to give new information about the labour market, but only to be used as a tool to forecast the payrolls report, a task it has failed to perform recently. On account of the consistent overshooting, JPMorgan does not forecast the ADP numbers, and will only revise forecasts for BLS nonfarm payrolls in the ADP numbers are significantly different from market expectations. Last month, senior economist David Sloan from 4Cast said the ADP report is "certainly not gospel for payrolls," but it does alter the balance of risks. He said markets won't ignore the ADP figures and it would be worth revising forecasts if the ADP number is significantly different from the consensus estimate. The ADP report began in May 2006. Its results are based on a sampling of 350k private companies' real payroll data collected from across the nation, covering around 20 million workers. The BLS nonfarm payrolls report will be released a day early this month due to the fourth of July holiday. Forecasts as of Tuesday afternoon were looking for a sixth month of losses, with the consensus anticipating 60k net losses. By Patrick McGee,
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