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Predicting the payroll employment numbers

Most people look forward to Fridays in general, but data analysts and economists eagerly await one in particular: the Friday when the BLS’s employment situation is published. Two headline figures in this release are the unemployment rate and total nonfarm payrolls. These numbers are still subject to revision after their initial release. For example, the payroll numbers are based on about 70% of the surveyed businesses, and that number gradually increases to about 94% through revisions. Thus, relying on this first release to tell the whole story may be a bit premature, given that something could be changed by the revisions.

ADP is a company that provides payroll services to many businesses. It uses its internal data, as well as other economic indicators, to predict a few days before the BLS’s release what the final payroll number will be. The graph here compares the BLS series (in red) and the ADP series (in blue) and shows that there are some spectacular hits…and misses. Note that the misses could be on either side―too high or too low―as both are imperfect measures. Yet, if both measures agree, that’s a strong indication that they hold some truth.

How this graph was created: Search for nonfarm payrolls, select the relevant series, and click on “Add to Graph.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: NPPTTL, PAYEMS

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