ADP's Encouraging Jobs Report Is Unlikely To Boost Stocks
The positive jobs report this morning will likely be insufficient to push stocks higher on this first day of October. Stocks were down in September, though they ended Q3 modestly in the positive column, with Fed worries and global growth concerns starting to weigh on sentiment. It is unlikely that this trend will change in any meaningful way in October and beyond.
The market’s dour mood aside, the September jobs report by payroll processor ADP (ADP) came in better than expected at 213K and the number for the prior month modestly revised down. Importantly, the 213K tally for August was the 6th straight month of jobs gains in excess of 200K.
The consensus expectation for Friday’s government jobs report from the Bureau of Labor Statistics (:BLS) is for ‘headline’ gains of 220K, which includes government jobs that have been averaging in the 5K to 10K monthly level lately. As such, today’s ADP report is essentially in-line with current BLS estimates, though the two reports can divert in a big way from each other at times. This was particularly the case in August when the BLS tally of 142K came short of the ADP’s 204K (now revised up to 206K). In Friday’s BLS report, most of us will be looking for positive revisions to that August report, to bring the tally closer to the 200K level.
Today’s ADP report showed broad-based gains, with small businesses adding 88K jobs, medium-sized businesses adding 48K and large businesses adding 77K. The goods producing sector added 58K jobs in September (up from 42K in August), with construction adding 20K and manufacturing adding 35K in August. The manufacturing sector’s September gains were the highest since May 2010.
The manufacturing ISM report coming out a little later today is expected to modestly pullback from the August level, but still represent a healthy pace of expansion in the factory sector. The service sector’s 155K jobs in September were down from August’s 160K tally, with gains in professional/business services and trade/transportation/utilities.
What does this report mean for the stock market? What it means is that the U.S. labor market recovery remains in place and that Friday’s government jobs report will confirm that last month’s sub-par reading was nothing more than a data fluke. As such, the ADP report and Friday’s government jobs reading wouldn’t change the consensus view of the economy or uncertainty about Fed policy.
It is these Fed-centric worries, coupled with questions about the global growth outlook and geopolitical concerns, that have been weighing on stocks lately — a trend that will likely become even more acute in this last quarter of the year that gets underway today.
