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Frequently Asked Questions

Thank you for your interest in the ADP National Employment Report^SM. Below you'll find frequently asked questions about the ADP report. Please contact us with any further questions about the ADP report, or visit www.ADP.com for more information about ADP.

Background:

Q. What is the ADP National Employment Report?
Q. Why was the ADP National Employment Report developed?
Q. What is the history of the ADP National Employment Report?
Q. What enhancements have been made since the ADP Report's inception?
Q. Why did ADP enhance the ADP National Employment Report at this time?
Q. What is unique about the ADP National Employment Report compared with other estimates?
Q. When is the ADP National Employment Report released?

Using the ADP National Employment Report:

Q. What information is provided in the ADP National Employment Report?
Q. How do I interpret the information in the ADP National Employment Report?
Q. Why is another measurement needed - and is the ADP National Employment Report in any way different?
Q. How can I use the ADP National Employment Report to better understand the U.S. employment situation?
Q. Are monthly changes in employment forecasted by the ADP National Employment Report indicative of changes in the ADP client base?
Q. Is the ADP National Employment Report, or any information or data related to it, available for purchase?

Privacy and Security:

Q. Is any client or personally identifying data used to develop the ADP National Employment Report?
Q. What steps has ADP taken to ensure the safety and security of information in the ADP National Employment Report?
Q. What would be the outcome in the unlikely event that - despite the security procedures put in place - some data is lost, stolen, or otherwise compromised?
Q. The ADP National Employment Report could be valuable to someone who has advance knowledge of the report. What steps has ADP taken to ensure nobody with advance knowledge profits from this information?
Q. Who else is involved with the development of the ADP National Employment Report, and do they have access to this data?
Q. What are the credentials of ADP's business partner, Macroeconomic Advisers, LLC, and what assurances do I have that they will keep this data safe?

Availability of the ADP National Employment Report:

Q. Where can I go to get the ADP National Employment Report and all additional detail?
Q. Are there any other ways to access the ADP National Employment Report and its detail?

Technical:

Background:

Q. What is the ADP National Employment Report?
A. The ADP National Employment Report is a monthly estimate of private nonfarm employment in the United States based on aggregated and anonymous ADP payroll data.

Q. Why was the ADP National Employment Report developed?
A. The ADP National Employment Report was developed to help meet the need for additional, timely and accurate estimates of movements in the national labor market among economists, financial professionals, government policymakers and academics. Because ADP pays 1-in-6 private sector employees in the United States every pay period across a broad range of industries, firm sizes, and geographies, it has a unique and significant perspective on the U.S. labor market.

Q. What is the history of the ADP National Employment Report?
A.The ADP National Employment Report first launched on May 3, 2006 as a forecast of April 2006 total nonfarm private employment, and was based on a subset of aggregated and anonymous payroll data that used, as of December 2005, approximately 225,000 of ADP's more than 500,000 U.S. business clients, representing roughly 14 million employees working in all 19 of the major North American Industrial Classification System (NAICS) private industrial sectors. An enhanced version of the ADP National Employment Report will be launched on March 7, 2007 to reflect the February 2007 employment situation, based on a subset of aggregated and anonymous payroll data utilizing approximately 392,000 of ADP's more than 500,000 U.S. business clients, representing roughly 24 million employees working in all 19 of the NAICS private industrial sectors. This enhanced version of the ADP National Employment Report also provides private employment forecasts by select industry sectors and across various company sizes.

Q. What enhancements have been made since the ADP Report's inception?
A. The enhanced version of the ADP National Employment Report is based on a subset of aggregated and anonymous payroll data that utilizes approximately 392,000 of ADP's more than 500,000 U.S. business clients, representing roughly 24 million employees working in all 19 of the major North American Industrial Classification System (NAICS) private industrial sectors. Sophisticated statistical methods, similar to those used by the U.S. Bureau of Labor Statistics, are then used to forecast total nonfarm private employment, as well as to provide insight into nonfarm private employment in the goods-producing and service-providing industry sectors, the manufacturing industry, and across small, medium and large company sizes. To gain a fuller understanding of the methodology used to develop this enhanced version of the ADP National Employment Report and its underlying statistical properties, please visit the "Methodology" section of our Web site. For further information about changes made to the ADP National Employment Report please click here.

Q. Why did ADP enhance the ADP National Employment Report at this time?
A. Since the inception of the ADP National Employment Report in May 2006, ADP has publicly stated its commitment to the Report's ongoing development and continued enhancement. Since its launch in May, ADP has received positive responses from economists, financial professionals, government policymakers and academics, who shared with ADP their suggestions for enhancing the ADP National Employment Report. Working hand in hand with noted economic forecasting firm, Macroeconomic Advisers, LLC, ADP has made even greater use of its vast aggregate and anonymous database of active payroll data, and used additional, highly sophisticated statistical procedures to produce a new, unique, and even more insightful forecast of U.S. employment.

Q. What is unique about the ADP National Employment Report compared with other estimates?
A. The ADP National Employment Report is unique in that it utilizes ADP's exceptionally large, aggregated and anonymous sample of active payrolls from approximately 392,000 of ADP's more than 500,000 U.S. business clients as compared to other forecasts and estimates that use surveys, job postings, and smaller payroll samples. The ADP National Employment Report is the only credible monthly resource based on actual payroll data known to provide insight into short-term movements in employment across various company sizes. Empirical analysis performed by the developers of the ADP National Employment Report, Macroeconomic Advisers, LLC, suggests that the ADP National Employment Report is one of the most accurate advance indicators of the monthly change in establishment employment as reported by the Bureau of Labor Statistics in its annual benchmark revision developed using the Quarterly Consensus of Employment and Wages (the BLS's "final print" number).

Q. When is the ADP National Employment Report Released?
A. The ADP National Employment Report is released monthly based on a pre-announced schedule. The release dates usually fall on Wednesday, two days before the release of the Bureau of Labor Statistics' Employment Situation Report.

Using the ADP National Employment Report:

Q. What information is provided in the ADP National Employment Report? A. The ADP National Employment Report provides the following information for the current month and the five months prior:

1. Forecast of total nonfarm private employment in the United States.

2. Forecast of nonfarm private employment in the goods-producing industry sector in the United States.

3. Forecast of nonfarm private employment in the service-providing industry sector in the United States.

4. Forecast of nonfarm private employment in the manufacturing industry in the United States.

5. Forecast of nonfarm private employment across small (1-49 payrolls), medium (50-499 payrolls) and large (>499 payrolls) company sizes in the United States.

ADP National Employment Report

Q. How do I interpret the information in the ADP National Employment Report?
A. The key forecast of total nonfarm private employment is represented as both a monthly employment level and a monthly change in employment. The employment level represents the total number of nonfarm private jobs in the U.S. economy at a common point in time each month. The change in monthly employment represents the increase or decrease in employment between these common points in time in two consecutive months. You can observe trends in employment by simply comparing each month's employment level change. Further detail on the construction and interpretation of the ADP National Employment Report are available in the Methodology section of our Web site.

Q. Why is another measurement needed - and is the ADP National Employment Report in any way different?
A. The ADP National Employment Report contains unique information about employment that is not publicly available anywhere else. Given the importance of employment changes as an indicator of interest rates and the overall condition of the nation's economy, credible estimates of employment are highly valued by economists, financial professionals, government policymakers and academics. The ADP National Employment Report is unique for several reasons:

1. It is released early in each month, providing a timely view of monthly employment.

2. It is the only forecast of employment that is both timely and draws upon a large and diverse data set based on real data about active U.S. employees. Other estimates rely on surveys of employment, job postings, or unemployment claims as a proxy for employment, or use smaller samples.

3. It is developed using methodologies similar to those used by the U.S. Bureau of Labor Statistics (BLS) and is particularly useful for anticipating the BLS's annual benchmark revision of employment (the BLS's "final print" number).

ADP National Employment Report

Q. How can I use the ADP National Employment Report to better understand the U.S. employment situation?
A. The ADP National Employment Report provides a unique perspective on total nonfarm private employment, select private industry sector employment, and private nonfarm employment by company size that is not available from any other source. Economic practitioners and financial market professionals recognize the value of this unique perspective and use the ADP National Employment Report in combination with other publicly available estimates of employment or their own proprietary models of employment.

Q. Are monthly changes in employment forecasted by the ADP National Employment Report indicative of changes in the ADP client base?
A. No. The methodology used to develop the ADP National Employment Report not only uses a subset of ADP's total payroll database, it also relies on a number of econometric techniques that filter out anomalous data and volatility, adjust for seasonality, and align disparate payroll period dates. In doing so, ADP's aggregate and anonymous payroll data is developed into a unique sample of monthly employment level, and change in employment, that is not reflective of ADP's entire client base.

Q. Is the ADP National Employment Report, or any information or data related to it, available for purchase?
A. No. ADP has no present plan to sell the ADP National Employment Report. The ADP National Employment Report will be made available to the public each month at no cost. Additionally, for those seeking a deeper understanding of the ADP National Employment Report and the methodology used to develop it, ADP makes certain aspects of the anonymous data, as well as analysis and explanation, publicly available on its Web site.

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Privacy and Security:

Q. Is any client or personally identifying data used to develop the ADP National Employment Report?
A. No. ADP's raw payroll data is stripped of (has redacted from it) all client and personally identifying content before it is used to produce the ADP National Employment Report. In no event does ADP supply client or personally identifying information to any third parties in connection with the ADP National Employment Report.

Q. What steps has ADP taken to ensure the safety and security of information in the ADP National Employment Report?
A. ADP utilizes various layers of data protection in the development of the ADP National Employment Report. To help guarantee that the monthly ADP National Employment Report and data used in its preparation are not compromised by unauthorized access or pre-release of any information: (i) Access to relevant data is limited to the few individuals with a clear need to know (supported by physical and computer security procedures); (ii) All persons with access are strictly prohibited from using pre-release information for personal gain and from providing pre-release information to the media or other unauthorized individuals; (iii) All persons with access to the ADP National Employment Report in advance of release are subject to a thorough background check; (iv) ADP Associates are bound by ADP ethics and information security policies and all outside individuals given access to the data are required to sign formal pledges regarding the foregoing; and (v) the ADP National Employment Report is released according to a publicized schedule to minimize the risk of pre-release access and helps ensure simultaneous release to all of the public. Certain aspects of the foregoing procedures are modeled after those used by the U.S. Department of Commerce and the U.S. Bureau of Labor Statistics.

No confidential client data is used in the ADP National Employment Report. The regional and industry data used in the ADP National Employment Report is aggregated and anonymous, and consequently, no information on individual ADP clients can be identified.

Q. What would be the outcome in the unlikely event that - despite the security procedures put in place - some data is lost, stolen, or otherwise compromised?
A. The ADP payroll data used to develop the ADP National Employment Report is "scrambled" in such a way that it cannot be used, in any way, to determine the identity or the confidential information of any specific client. This data conditioning takes place before any data leaves its secure repository for processing to create the ADP National Employment Report. In the highly improbable event that any, or all, of this data was literally lost or stolen, the data still could not be reconditioned to divulge the identity or confidential information of clients or their employees. More specifically, data exchanged between Macroeconomic Advisers, LLC (ADP National Employment Report development partner) and ADP are protected using either an encryption algorithm or the ADP secure FTP site. Under ADP Security Policies and Procedures, particular care is taken when storing, transmitting, or disposing of hard or electronic copies of data. The identity of companies or employees is not shared with anyone outside of ADP in connection with the ADP National Employment Report.

Q. The ADP National Employment Report could be valuable to someone who has advance knowledge of the report. What steps has ADP taken to ensure nobody with advance knowledge profits from this information?
A. In order to guarantee that the monthly ADP National Employment Report and data used in its preparation are not compromised by unauthorized access or pre-release of any information, the following security and release procedures have been put in place: 1) Limit access to the few individuals with a clear need to know; 2) Provide physical and computer security necessary to limit data access to those with a need to know; 3) Ensure that no ADP or third-party employee uses (or gives the appearance of using) pre-release information for personal gain or inadvertently provides pre-release information to the media or other unauthorized individuals; 4) Release the data according to a publicized schedule (announced schedule) that minimizes the risk of pre-release access and ensures simultaneous release to all of the public. These procedures are based in part on those used by The United States Department of Commerce, Economics and Statistics Administration and United States Bureau of Labor Statistics.

All Associates with advance access to the ADP National Employment Report are subject to a thorough background check. ADP Associates are bound by ADP ethics policies and partner associates must sign a formal pledge not to misuse any information and are subject to certain trading restrictions.

Q. Who else is involved with the development of the ADP National Employment Report, and do they have access to this data?
A. Macroeconomic Advisers, LLC, a well-known and highly respected econometric consulting firm, worked with ADP to develop the ADP National Employment Report, and is expected to continue to play an active and ongoing role in the ADP National Employment Report for the foreseeable future. This firm will have access to ADP's data, but only with company identities masked/redacted, utilizing data aggregated to levels that make the identities of companies undeterminable.

Q. What are the credentials of ADP's business partner, Macroeconomic Advisers, LLC, and what assurances do I have that they will keep this data safe?
A. Macroeconomic Advisers, LLC is one of the premier macroeconomic forecasting firms in the United States. Its forecasts and models are used throughout the U.S. government and by many of the nation's leading financial and non-financial firms. Macroeconomic Advisers, LLC worked hand in hand with ADP to build the secure processes that protect ADP's client data. Joel Prakken is chairman of Macroeconomic Advisers, LLC. Laurence Meyer is Vice Chairman and Director of Macroeconomic Advisers, LLC, and served as a member of the Board of Governors of the Federal Reserve from June 20, 1996 until January 31, 2002. For more information about Macroeconomic Advisers, LLC, please visit their Web site or see Macroeconomic Advisers economists' profiles.

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Availability of the ADP National Employment Report:

Q. Where can I go to get the ADP National Employment Report and all additional detail?
A. We invite anyone to visit the ADP National Employment Report Web site where they can freely access the entire Report, view commentary and analysis of ADP National Employment Report by noted economic analysts, and utilize a number of analytical tools. The ADP National Employment Report is also made available through a wide variety of outlets, including the Bloomberg service, many economic calendars such as EconoDay, and virtually every major news outlet.

Q. Are there any other ways to access the ADP National Employment Report and its detail?
A. Yes. Anyone can sign up for monthly e-mail delivery of the ADP National Employment Report by visiting the "Subscribe to the Report" section of our Web site. The e-mail delivery of the ADP National Employment Report, and access to all the supplemental information that supports it, are free to all via this Web site.

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Technical:

Q. How are the estimates of private nonfarm employment shown in the ADP National Employment Report constructed?
A. ADP records on private nonfarm payroll employment are sorted into 90 "cells" (10 private sector industries and 9 size classes within each industry), purged of outliers and then, for each cell, the monthly "matched-sample" growth rate of employment is calculated and seasonally adjusted. Next, within each industry, these growth rates (relative to their historical averages) are weighted by size and regressed against BLS benchmarked estimates of growth in employment by industry (also relative to their historical averages). Finally, the predicted values of growth in employment from these regressions are cumulated forwards and backwards from the most recent benchmarked BLS estimate of March employment, and the resulting levels are summed to the aggregates shown in ADP National Employment Report.

Q. How large is the sample of payrolls on which the ADP National Employment Report is based?
A. The size of the ADP sample varies moderately from month to month, but during the last six months of 2007 the matched-sample averaged approximately 392,000 payrolls covering roughly 24 million employees, which is representative of the expected matched-sample size going forward.

Q.How does this compare to the size of the monthly sample of payrolls on which BLS estimates of employment are based?
A. BLS regularly surveys approximately 400,000 establishments employing roughly 50 million workers. However, historically the BLS initial estimate of employment has been based on roughly 66% of this sample (or 268,000 establishments), the second estimate (one month later) has been based on roughly 82% of this sample (or 328,000), and the third estimate (two months later) has been based on roughly 89% of this sample (or 356,000). Hence the ADP National Employment Report is based on more payrolls than the BLS estimates are based on establishments. However, the average size of the establishments surveyed by the BLS is lager than the average size of the payrolls processed by ADP.

Q. What procedure is used to seasonally adjust the estimates of employment shown in the ADP National Employment Report?
A. The monthly "matched-sample" growth rates of employment in each of 90 "cells" (10 private industries and 9 size classifications within each industry) are seasonally adjusted concurrently using the Census X.12-ARIMA program with detection and elimination of statistical outliers.

Q. Are estimates of employment shown in the ADP National Employment Report adjusted for 5 week intervals between BLS survey periods?
A. The monthly "matched-sample" growth rates of employment in each of 90 "cells" (10 private industries and 9 size classifications within each industry) are seasonally adjusted concurrently using the Census X.12-ARIMA program with detection and elimination of statistical outliers.

Q. Do estimates of employment shown in the ADP National Employment Report include a "net birth/death" adjustment?
A. No. However, much of the BLS net birth/death adjustment is seasonal in nature, so the seasonal adjustment procedures used in the preparation of ADP National Employment Report implicitly capture much of this phenomenon.

Q. Are there monthly revisions to estimates of employment shown in the ADP National Employment Report?
A. Yes. Initial estimates shown in ADP National Employment Report are revised one month later, reflecting the incorporation of a relatively small number of payroll records that were not available for use upon the initial estimate. These monthly revisions are not necessarily related to revisions made by the BLS estimates to its estimate for the prior month.

Q. Are there annual revisions to the estimates of employment shown in the ADP National Employment Report?
A. Yes. Once a year, immediately after the annual level benchmarking of the BLS estimates of employment, the histories of all series published in the ADP National Employment Report are revised. These annual revisions reflect: (1) updated industry regressions based on the newly benchmarked BLS data, including the extension of the regression sample through the most recent benchmarked BLS data; (2) the advancement by twelve months of the reference period used to initialize the levels of employment shown in ADP National Employment Report; (3) the re-statement of historical seasonal factors.

Q. Are the levels of employment shown in the ADP National Employment Report benchmarked annually to each year's comprehensive count of employment reported in the Quarterly Census of Employment and Wages that serve as the basis for the annual benchmarking of the BLS estimates?
A. No. The data compiled by ADP are used to estimate the monthly growth of employment. Corresponding levels of employment are then computed by cumulating these growth rates forwards and backwards from a single reference level that is set in March of the last year for which an annual benchmarked estimate is available from the BLS. Hence, a comparison of the level of employment shown in ADP National Employment Report to the corresponding BLS estimate reveals how differently the two estimates have behaved since the reference period.

Q. How should I use estimates of the monthly growth of employment shown in the ADP National Employment Report in conjunction with consensus or other forecasts of growth in employment?
A. Estimates of employment in the ADP National Employment Report are well correlated with the corresponding BLS estimates, are available earlier, and contain information not incorporated in other sources. Hence they can be used to improve upon forecasts of the BLS estimates that are based on either "the consensus" or other empirical models used by analysts to anticipate monthly changes in employment. For example, historically the estimates of the monthly change in employment shown in ADP National Employment Report have been on the "right" side of the Bloomberg consensus 70% of the time, suggesting the wisdom of adjusting one's forecast of employment in the direction suggested by ADP National Employment Report. In addition, a weighted average of the monthly growth of employment shown in ADP National Employment Report and the corresponding consensus forecast has consistently out-performed the consensus forecast in anticipating the initial, second, third, and current BLS estimate of the change in employment in a given month. Similarly, estimates of the monthly change in employment shown in ADP National Employment Report can be combined with data like unemployment claims or diffusion indices published by the Purchasing Managers Institute to produce forecasts that are superior to those based on claims and diffusion indices alone.

Q. Do estimates of employment in the ADP National Employment Report anticipate revisions to the BLS estimates?
A. Historically, when the estimate of the monthly growth in employment shown in the ADP National Employment Report differed from the BLS initial estimate, there has been a moderately significant tendency for the BLS second and third estimates (one and two months later) to move towards the estimate shown earlier in ADP National Employment Report. However, there is very strong and statistically powerful tendency for the BLS estimate after annual benchmarking to move towards the estimate shown in ADP National Employment Report as much as a year earlier.

Q. What supporting data are available to analysts?
A. On www.adpemploymentreport.com analysts can find posted a file with the compete histories of all series shown regularly the ADP National Employment Report, including the current BLS estimates of the comparable series.

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