This post is by Michael Panzner from Financial Armageddon
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From Panzner Insights:
Each month, the Bureau of Labor Statistics and Automatic Data
Processing, Inc. detail what is happening in the jobs market. Although
the tallies of monthly changes reported by each side are often out
of kilter, their respective private nonfarm payroll totals have since
the end of 2000 moved largely in tandem.
From December 2000 through December 2011, the median monthly gap between the two was 78,000, or 0.07 percent of the total. The largest reported difference was seen in November 2002, when the BLS total was 394,000, or 0.36 percent, higher than its ADP counterpart.
But as the chart shows, there has been a big change. From January 2012 through last month, the spread between the two series has widened dramatically as the BLS tally rose at a faster pace than the one reported by ADP. Over the span, the median differential was 614,000 jobs, or 0.55 percent. The minimum differential was 396,000, or 0.36 percent, in January 2012, while the maximum was 809,000, or 0.72 percent, in December 2012.
One possible reason for the disparity is that either the BLS or ADP altered the methodology they relied on in the previous 11 years and that statisticians on the other side have not yet cottoned on. While this is possible, I find it hard to believe that those who crunch the numbers for such an important data series would not be quick to incorporate an updated approach in their own calculations.
[Editor’s note: some have pointed out that ADP did, in fact, revise
their methodology in late-2012 to bring its figures more closely into
line with those of the BLS; and yet, the gap between the two series appears to be as wide as ever. Say what?]
Another explanation is that statisticians at the BLS or ADP suddenly decided to “fudge” their numbers up or down, respectively. One obvious question, of course, is why would a company that stands to benefit from an improving jobs market want to report a more subdued sense of conditions on the ground than is actually the case? The logical answer is that they wouldn’t.
However, one could readily argue that many in Washington had a compelling interest in painting as bright a picture as possible of what was happening in an area of the economy that has remained in focus since the onset of the Great Recession. Why? Because they stood to gain from ensuring that policies that had benefited them personally–namely, continued government spending–remained in force.
One way to do that, of course, is to try and make it easier for those who were then in power to remain in charge after the next election, which just happened to be coming up in late-2012.