ADP Non-Farm Employment Change Misses

Alan Penny

4 December 2019

3 min read

Employment rate

  • Automatic Data Processing Inc. major payroll processor releases its data
  • Although not official, gives general feeling of employment in the United States
  • Non-Farm Payroll due this Friday

During the trading session on Wednesday, the ADP Non-Farm Employment Change figure was released in the United States, which is a precursor to the BLS Non-Farm Employment Change figures. (The official figures for the USA.) The figures are a release based upon the biggest payroll processor in the US, and what they observe. This isn’t necessarily a number that can predict the BLS figures, but it can give a general feel to what the official numbers might look like.

The announcement

The announcement came out as a surprise, but this is one that tends to be very volatile. It gives an idea as to whether or not the expected numbers for Friday’s NFP data release are likely to be met. As the ADP number came out at 67,000 jobs added, as opposed to the expected 137,000 figure, this could bring in concerns about employment at the end of the week.

The fact that the ADP number missed its expected figure gives Wall Street a warning that perhaps those employment figures are not going to be met

The Bureau of Labor Statistics is expected to release 168,000 jobs added for the month of November. The fact that the ADP number missed its expected figure gives Wall Street a warning that  those employment figures might not be met. That obviously has a lot of effect on the overall risk appetite when it comes to the US equities, and of course, the US dollar. However, in the post financial crisis world, this could have a different effect than what one would initially expect.

There is the possibility that a bad jobs figure could end up being thought of as good news for Wall Street, as it will more than likely push the Federal Reserve towards the idea of more quantitative easing, which has been the main driver of stock markets in the United States since 2008.

At this point, a stronger than anticipated jobs figure will also be positive as the US consumer is 70% of the economy. After all, if people have jobs, they can buy things.

Going forward

The next couple of days could be crucial for what happens next with the S&P 500. This time of year typically sees US stock markets rally due to the so-called “Santa Claus rally”. With Donald Trump openly stating that he could wait on a Chinese trade deal until after the election and that more importantly, he is only worried about jobs, this could greatly influence the overall risk appetite. This could cause mass chaos in the market if it is completely off the target.

One thing is for sure, there could be some fireworks at the end of the week. However, when looking at equities in general, there are plenty of reasons to think that they should continue to find buyers. The question now is whether or not we get some type of massive selloff in the short term. Looking at this employment picture, we are getting mixed figures in general.




Written By
Alan Penny

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