On Jobs, the Fed and Improbable Outcomes
Wednesday, November 2, 2016
As Q3 earnings season blasts through another thousand or so companies’ earnings this week, we see the Fed meeting yesterday and bringing forth a statement today on interest rates, as well as the latest ADP private sector payroll number, which is the main precursor to Friday’s non-farm payroll report number.
The monthly jobs survey from payroll services firm Automatic Data Processing ADP showed a gain of 147K private-sector jobs in the month of October. This was below the consensus estimate of 170K, though we see a big upward revision to September’s tally: 202K, up 48K from the initial read. This is mostly to do with the way ADP has revised its model; usually previous-month revisions are not that big.
ADP’s report showed 165K new jobs in Services, while Goods-producing employment fell 18K, consistent with the U.S. economy overall having become services-based, not manufacturing-based.
What does this mean for Friday’s jobs number? The Bureau of Labor Statistics (BLS) releases its full employment report usually the first Friday of each month. Including government-sector jobs, the consensus estimate is for 173K new jobs last month. While the ADP and BLS numbers often vary in their initial posts, over time their reads of job gains or losses gibe together.
Market futures were largely unaffected by the ADP news; its results are no big surprise to market participants, especially in the pre-market. The S&P 500, Dow and Nasdaq were all slightly down to unchanged from Tuesday’s close, which showed downward pressure ahead of next week’s General Election. Many analysts are eagerly awaiting a market climate that does not need to factor in the uncertainty of the election’s outcome.
What does all this mean for the Fed’s statement later today? Basically, about the only thing that could disrupt the near-term market’s trajectory would be the surprise announcement of an interest rate hike from Fed Chairwoman Janet Yellen, who is not scheduled to speak publicly following the meeting.
Of course, an electoral victory for Donald Trump over Hillary Clinton would be a market surprise akin to that of Brexit writ large, no — YUGE! — but here in Chicago we invite the improbable surprise, at least as far as the Cubs in Game 7 of the World Series in concerned.
Mark Vickery
Senior Editor
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