The focus will likely remain on the unresolved 'Fiscal Cliff'
question, even though we have a number of key economic reports
this morning. The problem with economic data lately has been that
it is difficult to discern underlying trends given distortions by
Hurricane Sandy. And we are seeing the same element at play in
today's private-sector jobs reading from payroll processor
Automatic Data Processing (ADP)
, though the headline tally is only modestly lower than what was
expected. The non-manufacturing ISM survey coming out a little
later is expected to have the least amount of storm effects and
will likely provide a relatively undistorted look on the
economy's service sector.
The ADP report is showing modestly weaker-than-expected
private-sector jobs of 118K in November versus expectations of
125K jobs created. This compares to gains of 157K in October
(revised down by 1K from 158K originally reported). The November
tally was reportedly lowered by approximately 86K due to Sandy,
with manufacturing, retail, leisure and hospitality, and temp
work particularly hard hit.
Goods producing sectors added 4K jobs in the month, with gains
of 23K in construction offsetting the decline of 16K in
manufacturing. In terms of company size, small businesses (with
less than 50 employees) added 19K jobs, medium businesses (less
than 500 employees) added 33K, and large businesses (more than
500 employees) added 66K. The service sector added 114K jobs. The
employment component of today's service sector ISM report will
give us more color on trends in this key sector.
This is not a bad report, keeping in mind that the storm took
out roughly 86K jobs from the tally. What this means that pace of
job creation in the economy has not materially changed from what
we have been seeing in recent months. The concern has been that
the recent downtrend in corporate capital spending will start
showing up in reduced hiring as well. But this report doesn't
show much evidence of that. The expectation for Friday's BLS
report ahead of this morning's ADP report was for headline gains
of around 80K. It is unlikely that we will see any material
revisions to those estimates.
The key takeaway from this ADP report coupled with what we
have been seeing in recent months is that the labor market is
modestly improving at a pace somewhere in the 150K monthly range.
If we don't see any material deterioration in this trend despite
the 'Fiscal Cliff' related uncertainties, then I will be counting
that as a positive for the economy.
ISM Services Index
is scheduled for release today at 10:00 AM EST, and is expected
to decrease to 53.5 in November after decreasing to 54.2 in
October and increasing to 55.1 in September.
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