The Jobs Data That Drives Markets (and me) Crazy
Stop expecting ADP to predict Friday's jobs report—here's what you should watch instead -Bob Iaccino-
Every month, we face the same maddening cycle. ADP drops its private payrolls data two days before the official Bureau of Labor Statistics report. Markets react. Analysts scramble to adjust their predictions for Friday's non-farm payroll number. And every month, they get blindsided by massive divergences that make no sense.
June 2025 was a perfect example. ADP reported private payrolls lost 33,000 jobs, crushing expectations for a 100,000 gain. Two days later? BLS said total nonfarm payrolls added 147,000. A 180,000-job difference that left everyone scratching their heads.
Here's what most people don't understand: ADP and BLS have a 96% correlation over the past decade, but that statistical relationship completely breaks down month-to-month. The two series regularly deliver contradictory signals that whipsaw markets and confuse policymakers trying to read the economy.
Source: publicly available at https://www.advisorperspectives.com/ Note: I added trend lines and inserted last month's BLS nonfarm payroll estimate as a bright orange bar to deliberately highlight that this represents an estimate of the actual release. Advisor Perspectives published this chart before the official BLS release.
Why They Diverge
The problem isn't random noise—it's fundamental methodology. ADP captures weekly payroll data from 25 million workers. BLS surveys 122,000 employers representing a third of all nonfarm jobs. They're measuring different things during the same reference week.
ADP counts workers on payrolls whether they got paid or not. BLS focuses on who actually received a paycheck. During strikes, hurricanes, or other disruptions, these differences explode into massive divergences.
Federal Reserve economists proved this in a landmark 2019 study. Using advanced statistical modeling, they found that combining both data sources reduces measurement error by roughly 20%. Neither series tells the complete story on its own.
The Real Problem
Markets still treat ADP as a preview of BLS, despite ADP explicitly stating their report "is not intended to forecast the Bureau of Labor Statistics monthly jobs report." Old habits die hard, as Wells Fargo's Sarah House puts it, but ADP changed its methodology in 2022 specifically to stop trying to predict BLS.
The result? Monthly confusion as active investors react to ADP data that has zero predictive power for what's coming Friday.
The Bottom Line
These divergences aren't a bug—they're a feature. Having multiple independent measures of job growth makes our understanding of the labor market more robust, not less. But until markets stop expecting ADP to predict BLS, we'll keep getting whipsawed by data that measures different aspects of the same complex labor market.
The monthly dance continues, but now you know why the music never matches.
-Bobby-