Instant view: Reaction to ADP private U.S. payrolls data

NEW YORK (BestGrowthStock) – U.S. private employers added a higher-than-expected 43,000 jobs in October compared to a revised loss of 2,000 in September, a report by ADP Employer Services report on Wednesday.

KEY POINTS: * The September figure was originally reported as a loss of 39,000. * The median of estimates from 35 economists surveyed by Reuters for the ADP Employer Services report, jointly developed with Macroeconomic Advisers LLC, was for a rise of 20,000 private-sector jobs in October. * The ADP figures come ahead of the government’s much more comprehensive labor market report on Friday, which includes both public and private sector employment. * That report is expected to show a rise in overall nonfarm payrolls of 60,000 in August, based on a Reuters poll of analysts, but a rise in private payrolls of 75,000. * Economists often refer to the ADP report to fine-tune their expectations for the payrolls numbers, though it is not always accurate in predicting the outcome.

COMMENTS:

MICHELLE MEYER, SENIOR U.S. ECONOMIST, BOFA MERRILL LYNCH, NEW YORK:

“Certainly ADP was a better reading than we had expected and suggests some upside to our forecast for total payrolls to increase by 35,000 and private payrolls to increase by 65,000. That said, ADP has been a misleading signal and we would be careful to read too much into today’s report. If tomorrow’s unemployment claims number comes in better than expected there is a better risk of a stronger reading than most are expecting for Friday’s payrolls data.”

JOHN CANALLY, INVESTMENT STRATEGIST, LPL FINANCIAL, BOSTON:

“The labor market is showing some solid footing, but this is not going to derail QE2. If the Fed was going to do something, it wouldn’t be based on today’s numbers. Some people may worry that it (the ADP report) might have an impact on Friday’s employment report but it is most likely that this will not have an impact on the Fed’s announcement later in the day.”

SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR & ASSOCIATES, TORONTO:

“It looks to me like employment is improving slowly but still is weak on the manufacturing side. The market’s concern about the recovery will remain and the Fed later today may look at this as still a sign they need to ease further on monetary policy.

“Equity markets’ (reaction) will wait for the Fed decision.

LOU BRIEN, MARKET STRATEGIST, DRW TRADING GROUP, CHICAGO:

“ADP was better than expected, but not necessarily indicative of what we are going to see on Friday. I might massage my expectation a little bit (for Friday’s non-farm payrolls data) but I don’t generally lean on ADP for my estimate.”

DAVID ADER, HEAD OF GOVERNMENT BOND STRATEGY, CRT CAPITAL GROUP, STAMFORD, CONNECTICUT:

“Typically we add back to ADP, the skew, for a vaguely better gross approximation of private job gains to NFP so with the average 66,000 — last six months — understatement by ADP we get to a 109,000 private payroll gain.”

ZACH PANDL, ECONOMIST, NOMURA SECURITIES, NEW YORK:

“Its clearly a better than expected outcome, not only did you see better job growth in October than was anticipated you had a large upward revision to the previous month’s estimate.”

“Taking those two things together you have a net surprise of 60,000 or so, which is a meaningful amount and probably raises expectations at least at little bit for Friday’s employment report.”

“Given everything that’s going on this week this should be considered a relatively minor development in our view, the FOMC meeting later today, Friday’s employment report and yesterday’s election are still going to dominate market attention. All that being said it’s a modest positive for growth and should be a positive for risk assets like stock prices.”

MARKET REACTION: STOCKS: U.S. stock index futures slightly extend gains after the ADP data. BONDS: U.S. Treasury debt prices slightly pare gains. DOLLAR: U.S. dollar rises versus euro and yen.

Instant view: Reaction to ADP private U.S. payrolls data