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Dollar Holds Steady, ADP Good Enough

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Slowly but surely the market's focus is shifting to the U.S. labor market and in particular, Friday's non-farm payrolls. A lot of attention is always paid to NFPs because job growth is the cornerstone of the U.S. economy. Without jobs there is no spending and without spending there is no growth. The lack of job growth has been the Federal Reserve's biggest problem. With the central bank at the cusp of introducing another round of stimulus, now more than ever, this month's non-farm payrolls report will get a lot of focus from policymakers and traders. In July, payrolls rebounded back above 110k after 2 months of extremely weak prints and as recent indicators suggests, non-payrolls will have a tough time exceeding 100k this month.

This morning's ADP report showed 91k jobs added to private sector payrolls in the month of August. ADP has been a poor predictor of NFPs but everyone was relieved to see that there was not a huge change in private sector job growth. If ADPs fell to 50k, we would have probably seen the dollar sell off aggressively but the number wasn't bad. The ADP and Challenger reports do not suggest the need for any position adjustments ahead of Friday's non-farm payrolls report. Earlier this morning, Challenger Grey & Christmas reported a 23 percent decline in planned layoffs in the month of August. Most of the job cuts were in the public sector which is an example of cost cutting by the U.S. government. In fact, the government shed jobs at the second fastest monthly pace this year. Thankfully fewer private sector job cuts made up for the difference and thats what the market cares about.

The lack of reaction in the U.S. dollar shows just how important ADP has become. Investors look at the number to make sure there aren't any big surprises and then move on. Although ADP and NFP was fairly close last month, in the July release, it was off by 139k. QE3 hinges upon Friday's report and if non-farm payrolls rise by less than 75k, the Fed could pull the trigger on more stimulus in September.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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