ADP data goes up against Statistics Canada
Following in the footsteps of its contingent in the United States, ADP Canada is now releasing labour market information for Canada on a monthly basis.
The company is measuring total non-farm payroll employment derived from the anonymous payroll data of client companies served by ADP Canada, looking at about 2.2 million workers.
“The quality, quantity and the real-time nature of our sources and information, the methodology, provides us a unique perspective on the movement in the labour market, one which will help businesses, governments, economists, analysts, researchers, academics and anyone who’s interested in workforce trends to gain a better understanding of what is happening in the Canadian job market,” said Holger Kormann, president of ADP Canada, at the launch event in Toronto.
Working in collaboration with Moody’s Analytics, ADP’s report is looking to align with employment numbers published by the Statistics Canada payroll employment report, the Survey of Employment, Payrolls and Hours (SEPH). The ADP report also uses industry-specific variables such as confidence indices, housing permits and merchandise exports.
“The information is based on real data, it is not a survey; it is timely, it is done once the payrolls are processed,” said Jan Siegmund, CFO at ADP in New York, speaking at the launch on Nov. 16. “It will exemplify in a very big way how the HR industry and how all industry will evolve using big data, analytics and insights to drive better HR decisions, to make companies more productive, more successful in the marketplace.”
ADP’s data processing involves a number of steps, including the removal of outliers, identification of clients by industry to aggregate the individual data into industry/super sector classifications, the creation of matched pairs, and seasonal adjustment. The raw data is also cleaned for outliers, anomalies and inconsistencies, and the North American Industrial Classification System (NAICS) is used for industry classification.
The intention for now is to release national numbers, said Kormann, though numbers by state are released by ADP in the U.S.
“We haven’t set a release date for that, but it is fair to assume down the road we will have more granular information (for Canada) also by geography.”
Of course, Statistics Canada has two well-known reports around employment: The Labour Force Survey (LFS), based on a survey of about 56,000 households, and the SEPH, produced by a combination of a census of payroll deductions provided by the Canada Revenue Agency, and the business payroll survey (BPS), which collects data from a sample of 15,000 businesses.
The difference in methodologies helps explain why ADP claimed employment in Canada decreased by 5,730 jobs in October, compared to a net gain of 35,300 jobs reported by Statistics Canada in its LFS.
More data appreciated
Data from Statistics Canada has always been a challenge, according to Colin Busby, associate director of research at the C.D. Howe Institute in Toronto.
“There often tends to be quite a bit of coefficient variation, there’s quite a bit of uncertainty, in the results when they first come out, and they’re often revised quite heavily over time, and so it’s a bit of a murky picture of the more recent labour market data.”
The sectoral breakdown in the SEPH tends to be a bit richer than the LFS and have more information, but the former struggles from a timeliness issue, he said.
“So you’re trying to get the right balance of timeliness and accuracy, and that’s why Statistics Canada has those two products. And ADP is there with a… rich data set that’s trying to blend the two.”
“We’ll have something nice to fill that lag, I think, that’s valuable. And, at the same time, (to) stress-test the accuracy of the Labour Force Survey results when they come out, so those two things I see as an advantage.”
Busby said he doesn’t discount the ability for ADP to play a wider role in the Canadian debate.
“But it’ll certainly take some time… for us to get a better understanding of whether or not it’s going to take on that position similar to what ADP does in the United States.”
Canada is in need of more labour market data — 1,000 per cent, said Dominic Lévesque, president of Randstad Professionals in Montreal.
“The market is changing, the landscape is changing really quickly, and the data we have often relies on very old data,” he said.
“There’s a lot of things we can do based on the big data, and I think now what companies are realizing, and one of the things we’re realizing as well, is that we have the data in the palm of our hands, we just don’t know how to organize it, how to capture the data. So if someone can help organize the data, someone that has access to that data, starts giving people access to the changes in the HR world, then this will help.”
“The more and more studies we have help push forward the importance of having the data and help companies make good decisions in the human capital space.”
The data can be used by employers for “total talent architecture,” said Lévesque, which includes succession planning, career mapping and people development.
“(It’s about) how do we influence generations in terms of schools and universities, how can we take them from being graduates to being CFOs or CEOs or COOs, so that’s where the data comes into play: What does it look like in terms of developing people based on the needs of the organization?”
“The depth matters more than size in terms of the studies being published, but I would actually say the more we have, the better it is, and every other source that gives us perspective outside of Statistics Canada is a really positive thing.”
Not a game-changer
On the data front, things are improving, according to Don Drummond, citing the government’s Job Vacancy and Wage Survey he helped to start back in 2011.
“Our mainstay is the LFS and it’s a reasonable survey. It’s a sample, obviously, but it’s a fairly large one,” said Drummond, adjunct professor at the School of Policy Studies at Queen’s University in Kingston, Ont.
It doesn’t really make sense to compare the LFS and the ADP report because one surveys employees, the other employers, he said.
“If you wanted to compare it, you would look from the SEPH survey… and that’s what ADP is touting as the advantage of theirs, you’ll get it sooner.”
Analysts don’t use the SEPH very much, he said, citing a preference for instant gratification.
“No one seems to ever accept that these things are widely unreliable on a month-to-month basis.”
However, clients of ADP are probably large ones, said Drummond, “so you’ve got a selection bias right there… I don’t imagine little corner stores are having their payroll done by ADP, so you have to be careful about that part too, and it’s probably quite skewed by sector.”
Is ADP’s report life-changing or game-changing? Probably not, said Drummond, who cautioned people not to make a big deal out of the new numbers until we see how they line up with the SEPH.
“I used to do U.S. forecasting; we’d look at (the ADP report), but I can’t say it was a big factor in the life of doing forecasting, it was just another piece of information.”
Evert Akkerman, principal at XNL HR & Communications in Newmarket, Ont., is also not sure how helpful the ADP report will be when it comes to his work in recruitment.
“I’m not waiting with bated breath for the next batch of job numbers because, to me, it doesn’t really affect what I do — that’s macro and when we’re recruiting, I’m at the micro level, focused on that particular job for that particular client.”
While the statistics may show hundreds of thousands of people are looking for work, for example, employers are still challenged in finding talent, he said, and the labour market reports don’t measure two important factors: “mindset and attitude on the part of the applicants, and… how seriously people are looking for work.”
