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Key Takeaways

  • The ADP report is one of two jobs reports investors absolutely need to pay attention to.
  • Strong jobs numbers could lead to a stock market rally, while a weak report is likely to send stocks tumbling.
  • Job growth remains strong overall, but hiring in some industries is beginning to slow down, according to the most recent report.

Economists and investors use various reports to understand the U.S. economy’s health and to get an idea of where we’re all headed. This is important information for investors; the stock market will sometimes take wild swings based on these reports. One of the most crucial reports is the ADP National Employment Report because it shows employment trends. Find out more about this jobs report and why investors need to pay close attention to it.

What is the ADP National Employment Report?

ADP, or Automatic Data Processing, Inc., provides payroll and human resources services for businesses of all sizes. Estimates have ADP handling payroll for a fifth of all employees working for a private employer in the U.S.

ADP collects anonymized data from the payroll services it provides to over 25 million U.S. workers, creating an accurate picture of the current state of employment. The report itself tracks the total private employment numbers over the course of a month and makes a note of all changes.

The report is easily understandable and straightforward in the data it presents. It comes in four separate sections, and Moody’s Analytics manages how the data is processed. The data is seasonally adjusted to get a realistic picture of the state of U.S. employment trends. The four parts of the report include the following:

  • Overview of the national data that shows changes in company payroll numbers according to business size and sector.
  • Small business breakdown by size and broad sector.
  • Franchise employment numbers by industries that include fast food, hotels, and real estate.
  • Regional assessment of employment patterns and trends, along with highlighting changes in six key states with breakdowns by sector and industry.

These four parts provide a macro and micro overview of employment trends used to gauge the state of the U.S. economy. The jobs report also includes important data on pay rates and measures the change in annual pay.

Why is the ADP jobs report important to investors?

The ADP National Employment Report is always released two days before the Bureau of Labor Statistics’ Employment Situation report, which comes out on the first Friday of every month. The ADP report is considered a preliminary look at employment data before the federal government releases a more detailed report. When the ADP releases positive economic data, investors can expect that the government data will follow suit regarding the number of jobs added to the economy.

Positive news about job growth indicates that the economy is going strong and people have more money to spend. Stock prices tend to increase because consumers are more likely to spend money on more than the necessities of life. This results in more sales and improved profits for companies. Investors can use this information to buy or sell stocks that respond to a strong jobs report. The same is true when there’s a downturn in employment; investors may want to shift their portfolios to companies that can weather a downturn in the jobs report.

The most important thing to remember is not to focus on the headline numbers but to dig into the data within the report. The overall job number could look good, but many sectors could be trending lower.


Currently, the Federal Reserve is closely monitoring the jobs report as it battles inflation. If job growth continues to remain strong, investors can expect the Fed to continue to raise interest rates aggressively. If job growth slows, the Fed could pivot with its plans.

It is also essential to review the pay data as well. If inflation is rising rapidly but wage growth isn’t keeping up, consumers are still falling behind financially and may cut back on spending.

Breaking Down the Latest Report

ADP released its latest employment report on October 5, 2022. It reported that private sector employment rose by 208,000 jobs for September 2022, and the annual pay increased by 7.8%. The original expectation for new jobs was 185,000, but the gains are tempered by the fact that the growth is under the recent three-month average.

The goods-producing, natural resources, and manufacturing sectors lost 58,000 jobs, while the service sector added 237,000 jobs. The trade, transportation, and utilities sector gained 147,000 jobs, but the information and financial activities sectors lost 35,000 jobs. The professional business, education, health services, and leisure and hospitality sectors gained 126,000 jobs.

The South saw the most job gains, with 89,000 jobs across all sectors, while the Midwest gained the least number of jobs at 25,000. Small establishments hired almost as many people as large establishments, while medium-sized establishments hired the most.

Job hoppers haven’t seen quite the same wins that they have previously when switching employers to earn more money. Their income gains notched down to an average raise of 15.7% in September from 16.2% in August. Those who stayed at their jobs got an average raise of 7.8%.

These numbers suggest that the post-pandemic recovery is well on its way in the hospitality and trade sectors, but professional jobs are shedding roles at a rapid rate. Part of the loss of professional jobs can be attributed to layoffs at companies with poor operating fundamentals and burned-through cash reserves. However, many people who have been laid off from their positions have high-demand skills sought by established and stable organizations.

The ADP jobs report may not be as robust as some analysts had hoped, but it still indicates a stable economy with minimal job losses across all sectors. The loss of people to the pandemic and the large number of people retiring have opened up more employment opportunities for those looking for work. The jobs report may stay positive for some time to come as a result.

Bottom Line

The jobs report offers important economic data that can influence the stock market’s direction, so investors need to pay attention. Otherwise, they risk getting caught off guard if a weak report is released and the stock market reacts negatively. The same holds true on the other end, when a strong report could send stocks soaring.

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