On ADP, the Fed, BLS and QE3 Odds - Analyst Blog
01 Agosto 2012 - 5:52AM
Zacks
The Fed is in the spotlight once again today, with the post-FOMC
meeting statement coming out this afternoon. But those looking for
fresh concrete actions from the Central Bank will likely be
disappointed as the odds of a new round of quantitative easing are
quite low. The statement will likely reiterate the Central Bank’s
commitment to ‘do more’ should conditions warrant. They will also
likely acknowledge the downside risks to the economic outlook, but
will stay shy of making a new announcement.
Many see the economic picture not bad enough to warrant another
round of the bond-purchase program, particularly given the
questionable utility of such a measure to the economy anyway. And
the positive-looking jobs data from payroll processor
Automatic Data Processing (ADP) this morning
certainly bears out that line of thinking. Also on deck for release
a little later is the July manufacturing ISM report, but the focus,
of course, will be on the Fed statement coming out this
afternoon.
??????The ADP report is showing better-than-expected
private-sector jobs of 163K in July and the tally June was modestly
revised downwards to 172K from 176K. The biggest increase came from
smaller firms (less than 50 employees), adding 73K jobs, while
medium and large businesses added 67K and 23K jobs in July,
respectively. Service sector jobs increased by 148K in July vs.
151K in June, while manufacturing employment increase by 9K in July
after the 6K gain in June.
The expectation for Friday’s BLS report, ahead of this morning’s
ADP report, was for headline gains of around 100K. If the ADP
report is painting a correct picture of private sector jobs in
July, then we will get a positive surprise on Friday from the BLS.
But given the ADP’s less-than-stellar record of late in foretelling
the government jobs number, hardly anyone will be making that bet
with this morning’s numbers.
But irrespective of how accurate or otherwise the ADP report is in
gauging the health of the labor market in real time, the important
takeaway may actually be that the labor market is weak but may not
be weakening any further. And it is this takeaway which is critical
to what the Fed will or will not do on the QE question.
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