ADP Employment Report and Stock Returns

Since May 2006, the ADP National Employment Report has offered a monthly estimate of U.S. nonfarm private sector employment growth using actual payroll data. The report is designed “to predict private-sector employment prior to the release of the CES [Bureau of Labor Statistics’ monthly Current Employment Statistics survey] report.” Do the ADP estimates predict U.S. stock market returns on the release day or over the interval to the next report? To investigate, we use both as-released (from press releases) and as-revised ADP data (from the historical dataset), calculated as percentage changes relative to the prior-month private employment base in the latter. Using the specified monthly data and matched daily opening/closing and dividend-adjusted closing prices of SPDR S&P 500 (SPY) during April 2006 through October 2021, we find that: (more…)