By Markos Kaminis
(Wall St. Greek)
Private Employment Report
reached the wire this morning, and somebody somewhere just rolled
their eyes. It's because the data point, which is actually just an
estimate that gets the attention of an important government report,
has tended to misfire from time to time.
The report for July showed ADP's estimate for a private nonfarm
payroll increase of 163,000, which was higher than the economists'
consensus forecast for 120,000.
The problem is that many of the townspeople don't know if
the wolf is really out there or not because of past
The SPDR S&P 500 (
) is up only fractionally despite this news, but against the weight
of a poor manufacturing data point at ISM. With two days to the big
government report, it's worth your capital to wait anyway.
The shares of employment services firms are indicating more
worry than ADP gives reason for, with Robert Half (
), Korn Ferry (
), Manpower (
) and Monster Worldwide (
) all lower. Kelly Services (KELYA), which specializes in temporary
workers, is appropriately higher since temps are getting the nod in
an uncertain environment.
Last month's report showed ADP's estimate for private employment
growth was off a bit. The company estimated private employment
increased by 172,000 (revised from 176,000) in June, but the
Employment Situation Report showed private employment actually rose
by 84,000. ADP uses real payroll data, so maybe the government has
it wrong, since it uses government employees to process the
information. I would bet on both being wrong, and just take your
key from the latest
consumer spending stall
, since unemployed people don't buy stuff.
Let's humor the boy and see what he's yelling about up there on
the hill -- maybe the wolf is behind him and he doesn't even know
it. ADP's latest data shows the service sector likely added 148,000
jobs, while the goods producing sector added 15,000. Manufacturing
added just 6,000 jobs. Goods producing job additions represent 9.2%
of the total additions here, which is a little less than the
sector's footprint on the economy.
Therefore, it likely confirms the latest
signs of recession
we've seen in the manufacturing sector; remember, jobs will lag.
Then, today, ISM's Manufacturing Index showed contraction for the
second month in a row, with the index marking 49.8 for July. That
said, ADP still has the sector adding jobs.
Small Businesses added the majority of jobs, with the addition
of 73,000 on net in July. Medium sized businesses added 67,000
jobs, while large businesses hired 23,000 new people on net. The
size categories are defined by number of employees, with "large"
including companies of 500 employees or more. Small businesses are
those with up to 49 employees. Small businesses do employ the
majority of Americans, and are properly represented here.
Anecdotally, you might find it interesting that construction
added jobs for the second straight month, adding 5,000 in July.
That offers support to companies like Jacobs Engineering (JEC),
KBR, Inc. (KBR) and PulteGroup (PHM). It all depends on what type
of construction is going on, and I suspect a lot of it is around
the development of natural gas reserves and distribution (or once
Keystone moves forward). Some of it may be related to public
infrastructure development in markets that can support that now,
like say in Texas and North Dakota. And some of it might be from
large publicly traded builders, now benefiting from the demise of
smaller competition, and in some cases, development of multi-family
unit facilities for our
Surprise, surprise, financial services firms added 9,000 jobs in
July. Actually, it was the twelfth straight month of net job
additions for the sector. I suppose the Facebook (FB) IPO
single-handedly played an important role in new hires at Morgan
Stanley (MS) and J.P. Morgan Chase (JPM).
As we all know, the large banks have been shedding jobs en
masse, with Bank of America (BAC), Citigroup (C) and others
seriously contracting their operations. I hear the banks are having
to hire a bunch of people to manage all the claims against their
mortgage writing operations, though. Also, regionals like TD Bank
(TD) and PNC Financial (PNC) are benefiting from the handcuffed
operations at larger banks, so some hiring might be developing on
the regional level. Sheriffs do not count as financial jobs, so all
the hands-on foreclosure work is not accounted for there.
Commentary on the report offered wisely tempered enthusiasm from
ADP's President and CEO Carlos Rodriguez, who noted that a better
and more consistent rate of job increases would be more meaningful.
It was the thirtieth consecutive month of job gains, but the last
three months of total nonfarm job growth dropped off significantly
from Q1, so there's a sense (obvious to some) that something might
be changing for the worse.
Another commentary offered on the report suggested tentative
hiring due to worry about European crisis and domestic fiscal
policy. While that is certainly the case, the American economy is
without a doubt feeling real and tangible impact from European
recession and slowing China growth. Also, in the U.S., our economic
recovery has been hobbled by the scars of the financial crisis,
including jobs that will never come back and a burdened and damaged
financial system. So, it's pretty tangible, and should not be
brushed off. In other words, the wolf really is out there.
I am long [[FB]].
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