Today, October private ADP payrolls rose +158k and September payrolls were revised up to +114k, from an earlier downward revision to +88k. The initial September figure had been reported as +162k when Macroeconomic Advisors was compiling the data. However, the monthly ADP survey is now put together by Moody’s Analytics instead of Macroeconomic Advisors. The new vendor is apparently using revised statistical approaches in estimating the data.
Additionally, initial jobless claims fell to 363k for the week ending October 27, from 372k previously (was originally 369K). This lowered the four week moving average by 2k to 367k, which is at the bottom end of its intra year range. Hurricane Sandy did not impact this week’s data, since the data preceded Hurricane Sandy. However, it is possible that we will see storm-induced volatility in filings over the next few weeks. Nevertheless, the underlying trend suggests that layoffs have barely budged since the beginning of the summer.
Unfortunately, the hiring side of the equation remains anemic, as employers hold back due to economic policy uncertainty and the fiscal cliff. Thus, October’s employment report should be in line with those seen during the third quarter.
Continuing claims were essentially unchanged (3263k vs. 3259k), which had the effect of maintaining the insured rate of unemployment, a leading indicator of the unemployment rate, at its cyclical low of 2.5%.
Given that there are new methodologies employed in estimating Automatic Data Processing (NASDAQ:ADP), Detusche Bank is currently de-emphasizing its importance until they have seen how well it forecasts BLS private payrolls in real time. They want to see how the initially reported ADP number and the initially reported private payrolls figure match up over time.
For tomorrow, analysts continue to look for a +125k increase in both nonfarm and private payrolls. This is essentially a trend like number, given the propensity of nonfarm payrolls to be revised up +23k, which has been the case over the past 12 months.
Many now expect the labor market to continue to show improvement, albeit at a slow and uneven pace, reflecting a combination of strengthening aggregate demand and slowing productivity growth.
Incidentally, data released today for Q3 shows the latter up +1.9% in the quarter and +1.5% over the previous year.
RBS believes that looking ahead past the near-term hurricane distortions, we will soon enter the holiday season: the latter typically presents a challenge for getting a “clean” read on claims between mid-November and mid-January, as seasonal adjustment factors struggle to overcome volatility generated by the many holidays around the year-end.
