Automatic Data Processing, Inc. (ADP) Earnings Call Transcript & Summary

Greetings, and welcome to the ADP National Employment Report call. [Operator Instructions]. As a reminder, this conference is being recorded, Wednesday, May 6, 2020. I would now like to turn the conference over to Joanna DiNizio with ADP. Please go ahead.

Good morning, and welcome to the April 2020 ADP National Employment Report Media Conference Call. With us is Mark Zandi, Chief Economist at Moody's Analytics, who will share his thoughts on the April findings. He has an earlier stop this morning. Therefore, we will take your questions by e-mail. Questions may be directed to Joanna DiNizio at [email protected]. Mark, please go ahead.

Thank you. Good morning, everyone. Well, this is one for the record books, a decline of just over 20 million jobs in the month of April. Not surprising, very consistent with the surge in initial claims from unemployment insurance in recent weeks. Cumulatively, the UI claims are up about 30 million. Of course, these are applications for UI and not all of them will be approved. And that's consistent with a very large decline in employment, so 20 million jobs. This is on top of 700,000 lost jobs in the previous month, the month of March, so closing in on 21 million in total job losses. The job losses are, as you would imagine, across the board, the biggest declines, again, no surprise, were in the leisure hospitality industry. Travel has been curtailed. Retail trade, hit very hard. Construction, manufacturing, all losing millions of jobs. Health care lost about 1 million jobs, as many health care facilities had to shut down in recent weeks. The only sector that didn't lose jobs was educational services. That goes to universities and junior colleges, training. But I'm not sure how long that will continue. The job losses are also broad-based across company size. So every size class saw very substantive job declines. And not a surprise, but the largest declines were for smaller companies, those with fewer than 500 employees, which traditionally is the benchmark for small business. So 11 million of the 20 million lost jobs, so disproportionately high. The most significant job losses were with the companies fewer than 50 employees. So just to give you a sense of that. The percentage decline in employment in the month was about 15.5% for companies that have fewer than 50 employees, the percentage decline was 17.9%. And just to round it out. Big companies also laid off, but as a percent of their employment base, it was smaller. So companies with over 1,000 employees saw a 13.2% decline in employment. So again, across the board, but disproportionately hard on smaller companies. I do think we'll continue to see more job losses for the month of May, the current month. The survey week will be next week, and I suspect we will see further job losses in the month of May. Not nearly what we saw in April. But if you told me, it's another 1 million or 2 million lost jobs in the month of May, I wouldn't be surprised. So cumulatively, the job losses in March, April and May, will wash out all of the job gains that we experienced in the economic expansion leading up to this point in time, the record long economic expansion. So we will ultimately lose all those jobs. I do think, though, the worst of it is at hand. I wouldn't be surprised if by the end of this month, as we're making our way towards Memorial Day, the job losses abate and we start to see some job growth, and I would anticipate a more substantive job growth in June, July and August. And this goes to really 2 things. First, the obvious is the business reopening. So businesses are starting to reopen across the country. I believe 32 states now are on track to reopen, at least partially. And I'm sure that we will see more states open up as we move through the month and move through the summer. And that will result in the rehiring of millions of workers. Now I don't think we're going to get back 20 million, 22 million lost jobs over the next few months. But I would anticipate that we get roughly half of those jobs back during that period. The other factor that should help support job growth, at least to some degree, are the government support programs, the various federal government efforts to try to help the economy and the most direct program is the Payment Protection Program, PPP, which will -- does provide money to businesses, the smaller businesses. That turn into grants if the business rehires workers. So I would anticipate that we see some benefit from that program, which has been very popular. Well over $600 billion of money has been already allocated to businesses that have some impact, and that should become more evident in May, particularly as we move into the summer months of June and July. So we should see a turn here relatively soon in the job statistics. And at least for the next few months, I would anticipate some big positive numbers. But just to reinforce a point, I don't think we're going to regain many of the jobs that we've lost in the last couple of months. That's going to take a while. So on the other side of this balanced economic activity as businesses reopen, I think the economy is going to struggle to create lots of jobs until there is some kind of medical solution to the virus, a vaccine or therapy or something that make people more comfortable about doing what they normally do. So I think it will be a while, a slog before we get back to where we were and it will probably take at least several years to regain those jobs. So the good news is I think we're at the apex of the job loss. That was evident in today's ADP number, really something I don't think anyone else is ever going to be able to say as we lost 20 million jobs in a month. But we're making a turn here, and I would expect the conditions to begin to improve. It's not going to be a quick revival. It's going to take some time. It may take more support from lawmakers and the Federal Reserve, but I think we're going to make our way back here in the next few weeks. Joanna, I'd stop there, turn it back to you and let you lead the way.

Okay. Thank you, Mark, and thank you, everyone, for joining this month. As a reminder, your questions may be emailed to [email protected]. The call has now concluded.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.