Even Good ADP Report Isn’t Changing Bleak U.S. Payroll Forecasts

(Bloomberg) -- A much better-than-forecast report on U.S. industry payrolls for May did little to persuade most Wall Street economists to revise their more-downbeat estimates for the government's official employment tally.

Economists at just four of the 71 firms in the Bloomberg survey adjusted their payrolls estimates to reflect a smaller, but still sizable, decline in the wake of the ADP Research Institute's report on Wednesday. ADP data showed private employment dropped 2.76 million, less than a third of the median forecast that called for a 9 million slump.

Part of the reason most economists are sticking with their payrolls forecast is that the ADP differs in methodology and doesn't directly correlate with the government's monthly prints.

While the Bloomberg survey median for official May job losses remained at 8 million, one of the largest upward adjustments was made by Stan Shipley at Evercore ISI. He now projects the Labor Department's report on Friday will show a net 5 million jobs were lost last month, compared with an estimated decline of 10 million prior to the ADP release.

Shipley said he underestimated the time it would take for the economy to build some momentum as several states reopened for business in late April and early May. Plus, the number of Americans on unemployment benefit roles declined almost 3.9 million in the week ended May 16, which includes the period the Labor Department surveys establishments and households to compile the monthly jobs report.

“More people are returning to work here than we thought possible before,” Shipley said, mentioning states such as Georgia and Florida.

Natixis North America LLC economist Troy Ludtka took his May payrolls forecast to a 5.9 million decline from minus 11.55 million. Other revisions came from First Trust Advisors (minus 4.5 million from minus 5.5 million) and Michael Brown at Visa USA Inc. (minus 7.2 million from 7.65 million).