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Without much ado, we have lots of economic data out ahead of the opening bell this morning, plenty of which will add to whether interest rates are ready to come down by an incremental 25 basis points (bps) or a more significant 50 bps. Our analysis won’t be complete until we see non-farm payrolls reported Friday morning, but these figures bring us closer to what we need to know.
ADP Private-Sector Payrolls 99K, Much Lower than Anticipated
In the monthly private-sector payroll report from Automatic Data Processing (ADP - Free Report) , the headline of +99K is the lowest we’ve seen since the pandemic era of 2021. It’s well off the +140K expected, and even below the downwardly revised +111K for the previous month. The trailing four-month average is for +130K, compared to +180K from the previous four months.
Goods-producing jobs were fairly well behaved in our current labor market environment, with 27K new private-sector jobs filled last month. Services, however, is where we see the numbers coming up short, at +72K. Medium-sized companies (between 50-499 employees) brought in the most jobs, +68K, followed by +42K from large firms. Small businesses lost -9K jobs in the private sector in August.
We once again see Education/Healthcare jobs leading the way, but only at +29K last month. Construction was close behind at +27K and Financials brought in +18K. Manufacturing was down again for August, -8K, while Professional/Business Services dropped -16K positions in the private sector for the month.
Wage growth is also relatively stagnant — another good sign that inflation has been tamed in our economy. Job Stayers saw +4.8% wage growth last month, unchanged with July’s tally. Job Changers reached +7.3%, also a lower figure than we’ve seen. ADP Chief Economist Nela Richardson said this morning on CNBC that we’re “finally seeing a normalization (in private-sector job gains) that’s a little cooler than expected.”
Pre-market futures dropped immediately following the report’s release at 8:15 am ET. Within five minutes, we saw the Dow go from -10 points to -20, the S&P 500 from -10 to -15 and the Nasdaq from -80 to -110 points.
U.S. Productivity In-Line, Labor Costs Drop
We also see a revision to Q2 Productivity this morning, with a +2.5% headline in-line with expectations, up 20 bps from the last print. This is the fifth quarter in a row of Productivity growth, and keeping in line with its upward trajectory going all the way back to 1947, after a few quarters of lagging productivity.
Unit Labor Costs represent the other side of the coin. These have come way down from the initial report, to +0.4% from +0.9%, and cutting in half expectations of +0.8% for the quarter. Its clear that labor-related inflation — based on these numbers and the August ADP report — is no longer a pressing concern for economists, nor, importantly, for the Fed.
Weekly Jobless Claims: Steady to Lower
Our normal Thursday allotment of the employment picture remains steady, as well. A headline of 227K Initial Jobless Claims were reported, right in between the 225-230K range analysts were looking for. This is down from the slight upward revision to 232K the previous week.
Continuing Claims, reported a week in arrears from new claims, came way down in this morning’s report: 1.838 million is the lowest print we’ve seen since mid-June, and nicely down from the downwardly revised 1.86 million reported for the prior week. That said, this is the 13th straight week above 1.8 million. Even still, the surge toward 2 million longer-term jobless claims does not look to be the certainty it did a month and a half ago.
Take-Away from Pre-Market Data
The debate between a 25 bps and 50 bps interest rate cut rages on. In truth, this is a fairly Goldilocks place to be, especially seeing we were supposed to have been knee-deep in a recession by this time of the calendar year. Inflation does appear to be curbed, though not at levels that point the economy toward crashing into the red.
That said, it remains unclear what the Fed intends to do. Friday morning’s Employment Situation report will provide answers, one way or the other: should jobs come in sub-100K like today’s ADP numbers did, we would increase the odds of a 50 bps cut. Something more in-line with the 160K expected would articulate a 25 bps likelihood.
Image: Bigstock
Inflation Controlled: ADP, Labor Costs, Jobless Claims
Thursday, September 5th, 2024
Without much ado, we have lots of economic data out ahead of the opening bell this morning, plenty of which will add to whether interest rates are ready to come down by an incremental 25 basis points (bps) or a more significant 50 bps. Our analysis won’t be complete until we see non-farm payrolls reported Friday morning, but these figures bring us closer to what we need to know.
ADP Private-Sector Payrolls 99K, Much Lower than Anticipated
In the monthly private-sector payroll report from Automatic Data Processing (ADP - Free Report) , the headline of +99K is the lowest we’ve seen since the pandemic era of 2021. It’s well off the +140K expected, and even below the downwardly revised +111K for the previous month. The trailing four-month average is for +130K, compared to +180K from the previous four months.
Goods-producing jobs were fairly well behaved in our current labor market environment, with 27K new private-sector jobs filled last month. Services, however, is where we see the numbers coming up short, at +72K. Medium-sized companies (between 50-499 employees) brought in the most jobs, +68K, followed by +42K from large firms. Small businesses lost -9K jobs in the private sector in August.
We once again see Education/Healthcare jobs leading the way, but only at +29K last month. Construction was close behind at +27K and Financials brought in +18K. Manufacturing was down again for August, -8K, while Professional/Business Services dropped -16K positions in the private sector for the month.
Wage growth is also relatively stagnant — another good sign that inflation has been tamed in our economy. Job Stayers saw +4.8% wage growth last month, unchanged with July’s tally. Job Changers reached +7.3%, also a lower figure than we’ve seen. ADP Chief Economist Nela Richardson said this morning on CNBC that we’re “finally seeing a normalization (in private-sector job gains) that’s a little cooler than expected.”
Pre-market futures dropped immediately following the report’s release at 8:15 am ET. Within five minutes, we saw the Dow go from -10 points to -20, the S&P 500 from -10 to -15 and the Nasdaq from -80 to -110 points.
U.S. Productivity In-Line, Labor Costs Drop
We also see a revision to Q2 Productivity this morning, with a +2.5% headline in-line with expectations, up 20 bps from the last print. This is the fifth quarter in a row of Productivity growth, and keeping in line with its upward trajectory going all the way back to 1947, after a few quarters of lagging productivity.
Unit Labor Costs represent the other side of the coin. These have come way down from the initial report, to +0.4% from +0.9%, and cutting in half expectations of +0.8% for the quarter. Its clear that labor-related inflation — based on these numbers and the August ADP report — is no longer a pressing concern for economists, nor, importantly, for the Fed.
Weekly Jobless Claims: Steady to Lower
Our normal Thursday allotment of the employment picture remains steady, as well. A headline of 227K Initial Jobless Claims were reported, right in between the 225-230K range analysts were looking for. This is down from the slight upward revision to 232K the previous week.
Continuing Claims, reported a week in arrears from new claims, came way down in this morning’s report: 1.838 million is the lowest print we’ve seen since mid-June, and nicely down from the downwardly revised 1.86 million reported for the prior week. That said, this is the 13th straight week above 1.8 million. Even still, the surge toward 2 million longer-term jobless claims does not look to be the certainty it did a month and a half ago.
Take-Away from Pre-Market Data
The debate between a 25 bps and 50 bps interest rate cut rages on. In truth, this is a fairly Goldilocks place to be, especially seeing we were supposed to have been knee-deep in a recession by this time of the calendar year. Inflation does appear to be curbed, though not at levels that point the economy toward crashing into the red.
That said, it remains unclear what the Fed intends to do. Friday morning’s Employment Situation report will provide answers, one way or the other: should jobs come in sub-100K like today’s ADP numbers did, we would increase the odds of a 50 bps cut. Something more in-line with the 160K expected would articulate a 25 bps likelihood.
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