ADP vs. NFP: They Work Best Viewed Together But One Is More Important Than The Other

The market got two pieces of labor market data this week. First was the ADP employment report on Wednesday and the more popular non-farm payroll report on Friday. The latter obviously gets more attention, but the June numbers were particularly interesting this time around because they potentially presented a real dichotomy in “is the labor market healthy or not”.

The ADP report, which covers the private sector, and the NFP report, which covers both public and private, aren’t an apples-to-apples comparison, but the interplay between them is kind of fascinating to watch. The fact that they’re presenting different narratives makes it worth exploring a little more.

To provide a little background, the ADP report shows 33,000 jobs lost in June, the first negative print since March 2023. The NFP report showed a gain of 147,000 jobs, well above expectations, and included an upward revision to the May number. The latter is especially important to see because NFP reports over the past several months have consistently included downward revisions to prior months. The number when it’s delivered seems fine, but it looks worse and worse when the data gets more accurate. My concern has been that it paints a picture of a labor market that’s not nearly as healthy as it might look on the surface.

In this economy, the biggest question now is whether the ADP or NFP report is providing a more accurate picture?