Statistically Evaluating the Jobs Report – A Prediction for Friday November 5th
Because the ADP Private Payrolls report, and the Bureau of Labor Statistics Employment Situation report both seek to measure the same economic variables, I hypothesized there should be a statistically significant relationship between the results of the two reports. A secondary hypothesis exists and suggests that it may be possible to use the ADP data, traditionally released on the Wednesday preceding the first Friday of each month, to predict the outcome of the Employment Situation report, released the first Friday of each month. With the assistance of Providence College student and Province Mortgage Associates intern Thomas Khoudary, initial results of the ADP and BLS reports from November 2005 through October 2010. Using statistical analysis tools, the following results were found.
Data used were initial results of the two surveys. While data are adjusted in subsequent months as additional information becomes available, I believe that the second goal of this project, to devise a method of predicting the Employment Situation report based on the ADP report, suggests that the initial data are more relevant to that purpose.
The ADP Private Payrolls report was believed to be most closely correlated to the Private Employment component of the Employment Situation report. Analyzing the data, substantial correlation was found, with a coefficient of correlation over 0.86. This indicates that the relationship believed to exist between the two surveys is present. Correlation analysis was also performed on the relationship between ADP and Total Payrolls. Surprisingly, a coefficient of correlation over 0.88 was found. Curiously, this suggests that the total employment situation is more closely related to the ADP survey than its sub-component private payrolls, that was expected to closely mirror the ADP results.
A regression analysis was performed on the data. The results show strong significance of the previously identified correlation, with a significance factor lower than .0001 for both ADP to Private Payrolls and ADP to Total Payrolls. This suggests that there is indeed a strong relationship between the two reports. Based on the regression analysis, I have derived a function I will use to predict the results of tomorrow’s Employment Situation report.
To predict the results of tomorrow’s jobs report, regressions of the employment data for the past 5 years and for the past 10 months were performed. The regressions over the greater period resulted in lower results, 15,526 private payroll jobs, and 28,004 total jobs. The 10-month regressions resulted in higher figures, 102,689 private jobs and 125,050 total jobs based on this Wednesday’s reported 43,000 private jobs added according to ADP.
After evaluating the available data, I believe that tomorrow’s Employment Situation report will show a gain of 73,000 jobs through private employers. Overall, the economy will add only 60,000 jobs, as a decrease in government employment will be a drag on other results. These results should provide some stability for mortgage rates.
My evaluation of this data is a relatively new undertaking. I anticipate these results will be refined over time. There is clearly a connection between the two reports, as was expected. Future evaluation should reveal more about this relationship.
Dan Hartman is a Senior Mortgae Advisor with Provice Mortgage Associates of Providence, RI, and has more than 10 years experience in the mortgage industry. He also serves as an Adjunct Professor of Finance and Economics with Roger Williams University and the University of New Haven. Extensive data was researched and compiled by Thomas Khoudary of Providence College.
November 4, 2010 by Dan Hartman · Leave a Comment
I have worked as a residential mortgage advisor since February of 2000 and a part of the founding team here at Province Mortgage. We believe that by doing right by a family today, we can create a relationship for life, and, hopefully, and ambassador who will share the experience with others. It is our team of professionals that helps us to create this experience.
