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Economic Data Deluge

Zacks Equity Research

Monthly private-sector payrolls for September have been released ahead of the bell this morning by Automated Data Processing ADP, posting a total of 135K new private-sector jobs last month. This is well off the pace initially set a month ago, when August ADP numbers reached 195K. This August number has been dialed back significantly to 157K this morning.

At 135K new jobs on the month, we still stay ahead of employment neutrality — the point at which retirees are offset by new hires. Through this lens, our ADP headline today still qualifies as good news. However, as economists and others have been predicting, our soaring jobs totals of the past several years appear to be a thing of the past for this cycle. The question now is: do we buoy here at around 135K for the next few months, or do we slide back further?

Goods produced 8000 new jobs for the month, while Services came in at 127K. In terms of percentages, nothing new to see here; both sides of the coin have dwindled from past levels. In terms of business size, large companies (more than 500 employees) took the lion’s share of gains with 67K, followed by medium-sized firms (50-499 employees) with 39K. Small firms, which often struggle to compete with compensation packages (including stock options and healthcare coverage) gained 30K in September.

Education/Healthcare Services led the industry pack once again, at 42K new hires, followed by Trade/Transportation at 28K and Leisure/Hospitality at 18K. Construction posted gains of 9000 new jobs, and Manufacturing finished to the positive at 2000. Key here is the pullback in Manufacturing, especially in light of yesterday’s disappointing ISM figure of 47.8%, which fell to contraction levels. Today’s report, however, more clearly signals broad-based weakening in employment data (on the private-sector side, at least), not just in goods-producing sectors.

Expectations for Friday’s big non-farm payroll report from the U.S. Bureau of Labor Statistics (BLS) are currently 145K new jobs for September. Again, this is still positive, though we may have seen the last of the 200K+ monthly hires we’d enjoyed following growth post-Great Recession and had even ridden monthly totals through the historic corporate tax cut in early 2018. The BLS number also counts government jobs, of course, and these will temporarily spike up with hires for the 2020 U.S. census. We’re a little early to expect major gains in census hires from last month, but they are coming.

Pre-market futures are down again this morning; clearly we’re seeing some profit taking and risk assessment going into the final quarter of calendar 2019. Considering how 2018 ended — not to mention the bouts of volatility we’d fought through over the past 9+ months — investors should still be sitting pretty at this stage.

 


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