Official and ADP jobs reports reveal 2 labor markets

There’s a scene in the cinematic masterpiece Mean Girls in which a character writes in big bloody script: “DO NOT TRUST HER.”

Apologies in advance to the good folks at ADP, who I’m sure are doing good work processing private payrolls. But we might want to keep in mind the above warning when assessing the monthly ADP jobs report. 

Official labor numbers from the U.S. Bureau of Labor Statistics showed a higher-than-expected increase of 147,000 jobs in June. The ADP report, released Wednesday, pointed to a decrease of 33,000 private sector jobs.

That’s not just a difference in magnitude, but also of direction. Emphasizing this point, the unemployment rate in June fell to 4.1% from 4.2% in the month before, defying a forecast for an increase to 4.3%.

The details lurking below the official jobs report, however, suggest I could be a tad unfair to the ADP report.

Jobs in the government rose by 73,000 in June, making up around half of the total nonfarm payroll growth for the month, as noted by CNBC’s Alex Harring. The ADP report only measures private payrolls — which exclude government jobs.

“The headline job gains and surprising dip in unemployment are undoubtedly good news, but for job seekers outside of healthcare & social assistance, local government, and public education, the gains will likely ring hollow,” wrote Cory Stahle, economist at Indeed Hiring Lab.

The huge divergence between the ADP and BLS reports, then, might not be that much of a statistical aberration — and could point to a growing schism in the U.S. labor market.