EMPLOYMENT DATA AT 8:30

Private payrolls increased 235,000 last month after an upwardly revised 182,000 in November according to data from the ADP Research Institute.  The median forecast in a Bloomberg survey called for a 150,000 advance.

Job gains were concentrated in businesses with less than 500 employees.  The largest companies cut 151,000 workers from payrolls, ADP said.

The immediate interpretation of the data is a very resilient job market and labor demand that is underpinning wage growth.

This data was partially confirmed by weekly jobless claims falling to a 14-week low.

Earlier in the week, the Atlanta Fed’s GDPNow 4Q economic tracker was referenced indicating quarterly estimated growth was revised up to 3.91%.  Economic growth in the successive quarters could benefit from the recently passed $1.7 trillion spending package.

The Atlanta Fed issues its “GDPNow” statistic several times during the quarter to gauge economic growth for the period.  The releases that occur later in the quarter are more accurate given the greater number of known statistics for that period.

According to the Bureau of Labor and Statistics (BLS), small businesses—defined as companies employing less than 499 people– created 90% of all jobs from 1997-2000.  GDP average about 4% during this era.  Is there any correlation between today and the last era of 4% growth?

As written many times, according to a recent Bloomberg survey 100% of respondents are forecasting a recession in the intermediate future.  Many recessions have been forecasted but only 13 have occurred in the post WW II period, none of which were predicated.

Today at 8:30 the BLS labor report will be released.  Will it validate the ADP data and surprise on the upside?  Perhaps the only concrete statement to make if the data is significantly different than the consensus view, volatility—either on the upside or downside—may greatly increase.

Consensus is expecting a 202k and 183k increase in nonfarm and private sector payrolls, a 3.7% unemployment rate, a 0.4% increase average hourly earnings, a 34.4 average work week and 62.2% labor participation rate (LPR).

Commenting about yesterday’s market action, equites closed near their lows as continued evidence of strength in the labor market fueled speculation the Federal Reserve has room to keep raising rates.

Ten of eleven S & P 500 sectors closed lower with only energy higher.  Dovish comments from St. Louis Fed President James Bullard who said rates are getting closer “to a sufficiently restrictive zone” did little to detract from the hiring data.

Last night the foreign markets were up. London was up 0.27%,  Paris up 0.30%  and Frankfurt down 0.05%.  China was Japan up 0.59% and Hang Seng down 0.29%up 0.08%,

Dow and NASDAQ futures are flat and down 0.35% before the release of the jobs data but values could change significantly if the data varies from the consensus view.  The 10-year is off 2/32 to yield 3.73%.

 

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