Greetings, and welcome to the ADP National Employment Report call. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded Wednesday, September 1st, 2021. I would now like to turn the conference over to Joanna DiNizio with ADP. Please go ahead. Good morning, and welcome to the August 2021 ADP National Employment Report media conference call. With us is Nela Richardson, Chief Economist at ADP. Nela will share her thoughts on the August findings, which is derived from ADP's actual data of those who are on a company's payroll. Then she'll take as many of your questions as possible before our hard stop at 9:00 A.M. Eastern Time. Nela, please go ahead. Thank you, Joanna. Good morning, everybody. Good morning from a very rainy day in Roseland, New Jersey. Our latest report suggests that the labor market recovery has downshifted. In August, private sector payrolls grew by $374,000 on net. The underlying model that produces the NER release also adjusts for seasonal declines in the initial release of the August employment levels compared to subsequent revisions reported by BLS. This is a pattern we've seen historically and is included in our model methodology, which you can find on the adpri.org website. Even with this technical adjustment in mind, final estimated job gains for August will likely fall short of the rapid average monthly pace of hiring that we've seen since January of this year. Despite the slowdown, job gains are approaching $4 million in 2021, though private sector payrolls are still about $20 million jobs short of pre-COVID-19 levels. The variability of job gains has narrowed of late, with small, midsize, and large firms growing mostly in lockstep. In August, companies with at least 500 workers added 137,000 jobs. Midsize companies picked up 149,000, and small companies gained 86,000, trailing a bit more than usual, but also in line with the other size firms. Companies of all sizes were averaging close to 250,000 job gains per month in the second quarter, a sign that the economic recovery was lifting a broader swath of firms. The recent slowdown has had mostly an equal impact on firms of different sizes as well. There are three trends that we think are impacting hiring in the second half of the year. One is the Delta variant. Service providers continue to do most of the heavy lifting, adding the lion's share of positions in August. This sector in general, and leisure and hospitality specifically, is posed to see the most gains in 2021. The U.S. economy is facing increasing headwinds as the pandemic wears on and the Delta variant creates uncertainty. Businesses are looking to staff up quickly but are also having trouble filling openings as quickly as they'd like. Many labor supply issues will resolve themselves in the coming months, but downside risks remain until the Delta variant is better controlled. The second trend we're watching is waning consumer confidence about the economy. It seems consumers are a bit more on edge in August. Recent sentiment indices point to a sizable decline in consumer optimism since earlier this year. This trend is also showing up in the decline of high-frequency data, especially those in the service sector that require close physical proximity, like restaurant reservations and air travel. The third trend we're watching is a positive counterbalance to the previous two I just mentioned, which is strong labor market demand. The most recent JOLTS data shows job openings remain at record highs as businesses look to staff up to meet still-surging demand. Moreover, jobless claims continue to improve and are sitting near the lowest level since the pandemic began. Now, I'd like to spend a little bit more time explaining the fourth trend that we're watching and that's impacting hiring this year, and that is the K-shaped recovery. The uncertainty surrounding the impact of the Delta variant has exacerbated the uneven pace of the jobs recovery. While we're seeing strong economic progress this year, that impact has been lopsided. First, we're seeing a widening of the wealth gap since the pandemic hit. Stock prices have soared, and home price appreciation is at a record high. That's meant as recently as the first quarter of 2021, the top 1% in the wealth distribution increased their share of wealth over the last year. Meanwhile, the share of the wealth pie has either declined or was flat for everybody else. That also suggests a difference in migration patterns that has affected hiring. ADP data shows how migration patterns for high-wage earners have shifted during the pandemic, with urban outflows differing widely across income brackets, potentially reshaping local economies and surrounding areas. For example, in an ADP study of the northeastern states, ADP payroll data shows that 2020 brought a sharp increase in net outmigration for workers making more than 100,000 a year and a parallel shift An increase in ZIP codes to more affordable suburban locations in Connecticut, Massachusetts, upstate New York, and Long Island, further out in Long Island. We've also seen an unbalanced labor market recovery towards this end. The labor market recovery has been quite uneven, with low-wage work service sector workers shouldering the bulk of job losses as the pandemic hit early on. Even with the jobs recovery well underway, African American and Hispanic unemployment levels remain much higher than the white unemployment rate due to longstanding racial inequities and discrimination in the labor market. ADP data also shows that the gains we've seen in pay equity for women during the COVID period was primarily due to the fact that the number of low-wage women were hit particularly hard due to the twin concerns of the economic downturn and health crisis and family responsibilities that showed up in a disproportionate share of job losses. Finally, we're seeing some unevenness in terms of supply bottlenecks. We're seeing how shortages in supply, materials, and workers are impacting our small ADPRI businesses and really businesses of all sizes. In our first quarterly SBS survey, that's our small business survey that we launched this summer at ADPRI, hiring was cited as the top challenge for small firms, and that has continued to be a key concern through the summer. To conclude, many fiscal, local, and even our monetary support mechanisms and programs are set to come to a close and fade away this fall after an unprecedented level of government spending to help cushion the downturn and accelerate growth. That means that the private sector will have to navigate an uncertain future more independently going forward than any other time during the pandemic. Part of that will require schools to reopen and stay open safely so that working families can participate fully in the labor market. Given the tremendous progress made to date, we think that hiring continues to be strong in the second half of the year, but the uncertainty of the present moment means a likely continuation in the unevenness in the pace of job gains. With that, we've covered a lot of ground in these intro remarks. I'm very happy to go deeper on anything in your questions. Thank you very much, Nela. Operator, we are ready for questions. Thank you. Ladies and gentlemen on the phone lines, if you would like to register for a question, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. Once again, ladies and gentlemen, it is one, four if you have a question. Our first question is from the line of Anneken Tappe with the CNN. Please go ahead, your line is open. Thank you. Good morning. Good morning. I had a quick question because this was obviously the second report that fell quite short of expectations. I think something that we talked a lot about last year was how hard it is to forecast in the weirdness that is the pandemic economy, in part because there are so many moving parts and so many unknowns. Like you were saying in your presentation, that there's just the unprecedentedness of the moment, along with the uncertainty coming from things like Delta, but also coming from things like the start of the school year. Nobody really knows what's going to happen, certainly make that work. I was wondering if you could comment a little bit on that, because it's just in the second month in a row. Yeah, I was wondering what you were thinking about it. Sure. The monthly variation in volatility has been immense because of the very reasons that you cite, Anneken, so I appreciate the question. If you look at year-to-date hiring for both the BLS and the NER, they're actually quite close. The BLS as of July of this year, had a run rate of 3.7 million jobs created through July. In comparison, NER is showing 3.4 million jobs created. They are both in line in terms of the gains over a period of time, though the monthly variation has been different. That is almost entirely due to the fact that this has been a market of tremendous churn and upheaval. The surveys are constructed differently, so they're measuring different things at different times. For the NER survey, our survey is based on active employees. Those are people that are on the books of companies. That means when companies are laying off workers or furloughing workers, they may still be on the books. It also means that early on, it was really hard to pinpoint both for the NER and the BLS, whether workers were furloughed temporarily and returning or were these permanent layoffs. I think that has been a big mystery that has overshadowed the revealing what the snapshot of what's going on in the labor market. As the pandemic has worn on, more of these temporary layoffs have become permanent. That wasn't immediately discernible in the early stages of the pandemic. I'll say a word about this month's report, because in our methodology, we do make this technical adjustment for August. Traditionally, if you look back over the past decade or so, you see that it is more typical for the BLS numbers to be revised up in August, that getting the reporting schedule correct takes a bit longer. People tend to be on vacation. There's some other technical reasons why the August month, in terms of reporting initially early on, looks different. We try to account for that in the model. For that technical reason, this report reflects the August adjustment. That being said, Anneken Tappe, we still believe that the model is pointing to a slowdown in hiring, that there are these bottlenecks still in the labor market. We think that they fade over time, but we're not seeing the torrid pace of job gains that we saw earlier this year. Thank you so much. Can I just really quickly add on? Basically, without the adjustment in your model, the number might have been lower than what it actually was reported at. Is that correct? No, that's not correct. Okay. Yeah. We do make that technical adjustment. I just wanted to make sure. Yeah. Okay. Thank you. Sure. Thank you. Ladies and gentlemen, once again, on the phone lines, you can press one, four if you have a question. Once again, that is one, four. One moment, please. All right. Once again, as a reminder, it is one, four on your telephone. Okay, I am showing no further questions on the phone lines at this moment. Okay. Well, thank you very much, and thank you everyone for joining us this month. We look forward to having you back here for the next report, which will be released on October 6th. The call is now concluded. Thank you, ladies and gentlemen. That does conclude today's call. We thank you for your participation and ask that you please disconnect your lines.