What Does the ADP Say About Economic Growth?

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Stocks yesterday were indicated to open essentially flat even before yesterday’s ADP National Employment Report and the labor market report, which didn’t add any excitement. The government jobs report coming out on Friday is the key economic read on the docket now.

jobs unemployment jobless recoveryThe ADP read came in tad bit below estimates at 208,000 for November compared to 233,000 in October and 213,000 in September. The November tally is the eighth straight month of job gains in excess of 200,000. Importantly, the tally for October was modestly revised higher. The consensus expectation for Friday’s U.S. Bureau of Labor Statistics (BLS) report is for ‘headline’ gains of 230,000, which includes government jobs that have been averaging in the 5,000 – 10,000 monthly level lately.

As such, yesterday’s ADP report wouldn’t have much bearing on current BLS estimates, though the two reports can divert in a big way from each other at times. This was particularly the case a few months back when the two reports diverged in a big way in August, though that month’s gap has since been narrowed a bit in subsequent revisions.

Yesterday’s ADP report showed broad-based gains, with small businesses adding 101,000 jobs, medium-sized businesses adding 65,000 and large businesses adding 42,000. The goods-producing sector added 32,000 jobs in November, down from the 46,000 tally in October. The Construction industry added 17,000 jobs compared to October’s 26,000 tally while manufacturing’s 11,000 jobs for the month were about in-line with the prior-month’s 13,000. The service sector added 176,000 in November, up from October’s 187,000, with professional and business services producing strong numbers.

In terms of market impact, the ADP report reconfirms what we have known for some time — that U.S. economic growth is looking up even as the outlook for the rest of the world is coming down. The growth picture beyond the U.S. borders isn’t looking very promising as this morning’s composite Markit Purchasing Managers’ Index (PMI) survey for Europe shows. Market participants expect that the persistently weak run of European data will prompt the European Central Bank to start implementing the type of monetary policy that the U.S. Federal Reserve is getting out of and that the Bank of Japan is also currently undertaking.

Not much seems to have come from today’s ECB meeting, but hopes remain high that a full-fledged quantitative easing program for the region will get underway some time in early 2015. These hopes have pushed lower the region’s bond yields as well as the exchange value of the common currency.

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Article printed from InvestorPlace Media, https://investorplace.com/2014/12/adp-bls-labor-ecb/.

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