Spain's reticence to ask for a bailout remains on the back of
investors' minds even as we got a reassuring-enough labor market
reading from payroll processor
Automatic Data Processing
(
ADP
) this morning. The ADP report is showing modestly
better-than-expected private-sector jobs of 162K in September,
while the gains in preceding two months were revised
lower.
The August tally was lowered by 12K to 189K and the July number
was reduced by 17K to 156K. The consensus expectations was for
September gains of about 153K.
The biggest increase came from smaller firms (firms with fewer
than 50 employees), adding 81K jobs, while medium and large
businesses added 64K and 17K jobs in September, respectively.
Service sector jobs increased by 144K in September, down from 175K
in August, while goods producing sectors added 18K. Importantly,
the construction sector added jobs for the fourth straight month,
adding 10K jobs in September, the strongest monthly run rate since
March, when favorable weather helped construction activities.
The expectation for Friday's BLS report ahead of this morning's
ADP report was for headline gains of around 118K. But given the
disconnect between the ADP and BLS readings last month, it is
unlikely that we will see any material revisions to those
expectations following this release.
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 100K to 150K range. But this
pace of improvement is just enough to keep the unemployment rate
steady at current levels. For a significant drop in the
unemployment rate, we need a much faster pace of job
gains.
Of course the labor force participation rate, currently at a
record-low level, is a key variable as well in how fast the
unemployment rate could fall. And the participation rate is not
just a function of cyclical elements as demographic factors are
having a bearing on it as well.
In corporate news,
Family Dollar
(
FDO
) came in-line with earnings and revenue expectations this morning,
while
Monsanto
(
MON
) came modestly short of expectations. Monsanto shares have been
strong performers lately as other agriculture-centric names have
faltered due to drought concerns. It will be interesting to see if
the stock can sustain its momentum following today's miss.
The
ISM Services Index
is scheduled for release today at 10:00 AM EST, and is expected to
decrease to 53.6 in September after increasing to 53.7 in August
and 52.6 in July.
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