Wednesday, August 1, 2012
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 get
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 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 (
) 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
(firms with 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 it 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
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