The ADP Employment Change and the Non-Farm Payroll (NFP) report are two key indicators of the U.S. labour market. While both track employment, they differ in scope and timing, often leading to different results. Here’s a simplified look at what each report means and how ADP data can influence expectations for the NFP release. 

What is ADP Employment Change? 

The ADP Employment Report, released monthly, estimates private-sector job growth using payroll data from about 400,000 U.S. businesses. It provides a snapshot of employment trends, including jobs by business size and industry. It is released two days before the NFP report, making it a valuable early indicator, but not a perfect predictor, as it excludes government jobs. 

What is the NFP Report? 

The NFP Report, published by the Bureau of Labour Statistics, tracks employment in both private and public sectors, offering a more comprehensive view of the labor market. Along with job growth, the NFP includes data on the unemployment rate and wage growth. The Federal Reserve closely watches NFP data to guide decisions on interest rates. 

How ADP Affects NFP Expectations 

Since the ADP report is released before the NFP, it often shapes market expectations. A strong ADP report may lead to optimism about the NFP, boosting stock prices and bond yields. Conversely, weak ADP data could lower expectations for NFP and impact markets negatively. However, because ADP and NFP use different methods, their numbers don’t always match. 

Conclusion 

While the ADP report offers a preview of private-sector job trends, the NFP report provides a fuller picture of the labour market. Understanding both helps investors and policymakers gauge economic health and predict potential market movements. However, it’s essential to view the ADP report as just one part of the bigger employment picture.