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ADP Report Improves, But Still Below Estimates

August 5th, 2009 Michael McDonough

July’s ADP National Employment Report showed a change in payrolls of -350K, compared to a revised drop of -463K in June.  The latest Bloomberg consensus estimate was -350K.  The job market continues to improve, despite remaining at dismal levels.  Initial market reaction was negative to the report with interest rates trading up and equities futures down, however, they have both since moderated.

According to the report the service sector shed 202K jobs, while the goods producing sector and manufacturing lost 169K and 99K, respectively.  This was the manufacturing sectors lowest monthly drop since September 2008.

This release is considered a window into Friday’s official payrolls report.  With this in mind, today’s result, despite my original thoughts, could place some negative pressure on analysts forecasts for Friday’s off payrolls release. (current consensus is -300K)  Recently, ADP started incorporating jobless claims into its calculation, and given the recent quirks in the seasonal adjustment factors to that index, this month’s ADP number may be overly optimistic.  According to ADP, “July’s employment decline was the smallest since October of 2008 and continues the notable improvement between the first and second quarters of 2009. Nevertheless, despite recent indications that overall economic activity is stabilizing, employment, which usually trails overall economic activity, is likely to decline for at least several more months, albeit at a diminishing rate.”

More To Come…

ADP Employment Report vs. Payrolls

ADPSource: Bloomberg

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