The Employment Situation is the most eagerly awaited news on the economy. Because the news is very timely, only one week after the month covered, and because of the amount of data about the job market and household, this report has great economic and political significance. “No single economic indicator can jolt the stock and bond markets as much as the jobs report.¹”
The ADP National Employment Report is always released two days prior to the BLS data. As one could tell from today’s bullish session, this report does not carry much market-moving influence. The ADP Report is disregarded by market participants as it has not been around long enough to build credibility and because of the perception that it is not statistically signifacant compared to the government’s data.
That perception is incorrect.
I have pasted here the statistical properties of the ADP Report. You can go the site and read them in a larger format here:
Because there is statistical significance to the report, I’m surprised it is not given greater weight. Anyway, that’s a debate for another time.
Here is the meat of the report released today:
Nonfarm private employment declined 23,000 from January to February 2008 on a seasonally adjusted basis, according to the ADP National Employment Report™. The estimated change in employment from December 2007 to January 2008 was revised down 11,000 to 119,000. February’s decline of 23,000 signals a deceleration of employment growth across businesses of all sizes.
Employment in the service-providing sector of the economy grew 47,000, while employment in the goods-producing sector declined 70,000, the fifteenth consecutive monthly decline. Manufacturing employment fell 40,000 in February after declining a revised 3,000 in January, and marked the eighteenth consecutive monthly decline.
Read the rest of it and see some nice charts here : Complete ADP Employment Report
Here is the issue: Last month the ADP Report showed growth of 130,000 jobs, while the government’s estimates were -17,000. Note that the market has not traded past the high of February 1st, the same day the government released the BLS estimates of -17,000.
As today’s ADP Report shows -23,000 jobs, let us play a game of “What if…” What if Friday’s jobs numbers are of a similar spread and relationship to the ADP numbers as last month. If so, on we could expect the BLS to report -170,000 jobs on Friday.
What would that do to the market?
Finally, the other reason the Employment Situation moves the markets is because it can often be a surprise. Anyone want to predict if there will be a surprise Friday?
See the Bloomberg consensus estimates here: Bloomberg Employment Situation Consensus Estimates. Their estimate is creation of 25,000 jobs.
¹Baumohl, Bernard. (2008). The Secrets of Economic Indicators: Hidden Clues to Future Economic Trends and Investment Opportunities. 2nd Ed. Wharton School Publishing. Upper Saddle River, New Jersey. Pg. 25
Wood,
Damme your eyes sir, you’ve gone all Fundie.
What happened to the magic # $171.41?
jog
Lol…I don’t know…and it was .40, not .41.
I’ve always been fascinated with the macro-economic numbers. Unfortunately, I have never found that using them in my trading decisions has ever made me more profitable. In fact, it may hurt my performance.
Regardless, I’m still fascinated. I’m really curious to see how this ADP vs. BLS stats will play out over the coming years.
Dammit. Guess, people. Postulate a theory. For Christ’s sake, have none of you considered what the employment situation might be?
Guess not. So nobody here has an opinion on the NFP report Friday.
I’ll just stick to charts next time.
This post was too many words for me to read, but did I see you were based in Richmond? If so, sorry about that. Just kidding, in NoVa here and have spent some fun days and nights in Richmond.
And regarding employment, I think it will be interesting how much higher we will go over 5%. If i remember right there are a huge number of jobs that have been “hot” in the economy that aren’t even counted in these polls. Realtors, a number of construction positions, etc. Do you know if that’s true? Are the “independent contractors” counted in this mess of numbers? If not these figures are always going to appear low in historical terms.
Flat to negative. Nothing good will come of it.
IMHO the employment numbers will be negative and the market should logically go down, but the spin machine will be working full force to somehow present the numbers as “not as bad as expected” or some crap like that, in order to prevent full on financial Armageddon.
The financial melt-down was bad enough today and after taking a fresh look at it this AM, I rolled over and sold out of some of my stocks (including the infamous CPHD) and bought QID, a variety of puts and added to my SMN and DUG.
Just before 4 pm I thought, Shed is right, we’re going to close at a 52 week low for the S&P today and it’s a bad sign. I sold more, even my PEP shares, and raised cash.
May everyone’s inverse ETF’s pay off big time tomorrow.
Will you be going long in a few days as we must be oversold and have the fed meeting next week?
If so, takea look at CHK and JOYG …. a technician on fastmoney says they have multi-year bases and upon a breakout will see plenty of upside …. I was gunna buy UYG but these may have more upside …. your thoughts greatly appreciated, Woody.
#8
PS: Banked lotsa coin from my puts & IETF’s today (MOO puts, DXD, SMN) … happy trading!
Here’s the Chartology from Fast Money tonight:
http://www.cnbc.com/id/23561416