Yesterday’s ADP jobs report, the first for the Trump administration, showed the “Trump effect”—298,000 versus estimates of 187,000. Any doubt that there would not be a rate hike was wiped out. Odds makers in Chicago are estimating a 91% chance of a quarter percent hike when the FOMC meets next week for its two-day meeting on March 14-15. There is always a chance of a surprise with the headline number from the government Friday. However, as of late, ADP has been a good bellwether. Last month their tabulations were 9,000 off from the official government count, and in December, they were only 8,000 off.
Construction added 66,000 jobs, the most in 11 years, and manufacturing increased by 32,000, the most in five years. These two groups are not only traditionally higher paying than the service sector, but also reflect real business confidence in the economy. That said, the confidence level still only derives from the anticipation that the Trump administration will indeed come through on the promised tax cuts, deregulation and infrastructure projects.
Unemployment benefits, another number traders monitor closely, came in at 243,000 this morning. There was a jump of 20,000 from last month’s reading of 220,000, which was a 44-year low, and today’s number was the 105th month in a row of sub-300,000 readings. It’s a sign of a strong economy— another indication of business optimism picking up. Tomorrow, we also get a look at wages. They have been rising ever so slowly—but rising, nonetheless.
Yesterday’s action in the markets was typical of traders waiting for the Fed. The S&P 500 (^GSPC) fell for the fourth out of five sessions, down -0.2%. Yet, at 2,362, we are only 1.6% below its all-time high. The Dow (^DJI) took a -69.03 loss to finish the day at 20855.
Crude oil breaks down
Yesterday was a bad day for black gold. It was the result of strength in the US dollar combined with surging oil output, along with a growing stockpile of US crude oil. The price in crude plunged more than 5% to $48.59 a barrel, the low for the year. The price which had been locked in the tightest trading range in a decade saw trading volume explode with 430,000 contracts in Brent crude for May delivery.
Don’t look for much of a move today as traders wait for not only tomorrow’s official government number on jobs, but also next week’s non-surprise Fed hike.