Shares of ADP are up 2.5% thus far in 2016, far better than the 1% drop in the S&P 500. The payroll provider has outperformed the index over the last two, five and ten year periods as well. Jan Siegmund, CFO of ADP, said the job expansion of the past few years provides a nice tailwind, but is not the sole basis for the company’s success. ‘Our clients are growing and that helps us in our revenue growth,’ said Siegmund. ‘Not much as one would think as only 1% of our 9% organic revenue growth is driven by the growth of our clients, but our clients have enjoyed job growth of 2% to 3% in the last few years.’ ADP pays more than 24 million people in the U.S., or 1 in 6 workers. ADP has distributed the ADP National Employment Report (NER) free for the last decade. As opposed to the U.S. Bureau of Labor Statistics (BLS) employment reports, ADP said its accuracy centers on the fact that its report is based on actual payroll data, not survey data. The BLS counts employees ‘when they are paid’ while ADP counts employees ‘listed as active on an employer’s payroll.’ ‘In some months we are spot-on and in other months we differ slightly, but overall the difference is nominal and shows the NER is an accurate,’ said Siegmund. During the last 10 years, ADP has reported that the share of manufacturing jobs has declined from 12% to 10%. Regionally, job growth has shifted away from the Northeast and Midwest to the South and West, according to ADP. Furthermore, small companies with fewer than 50 employees that survived the recession have fared better in the labor market than companies employing 500 people or more. Siegmund said it has taken 10 years for the labor market to attain full employment again. Over the last five years, average monthly job growth has been just about 200,000. Also, ADP said there is evidence that wage growth is picking up as the economy gets close to full employment. The tech and information sector has thriving workforces, but overall employment growth within the sector was flat last quarter. As a result, these workers were able to exploit this and managers were forced to compete for a limited number of workers.
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