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Following an historically sharp sell-off a couple weeks ago in the stock market — spurred by stay-at-home orders by local and state governments to combat the COVID-19 coronavirus pandemic and the subsequent drain on the day-to-day economy — job layoffs took the U.S. from a long-term robust position in its labor market to something much, much worse. Just how much worse has yet to be determined. Analysts were looking toward today’s ADP Employment Report to get a clearer picture.
This brings us to our current good news/bad news scenario: the ADP headline number came out much better than expected at -27K private sector payroll totals; expectations were for -125K. That’s the good news. The bad news is that the ADP sample came a week before the bottom fell out, and those -125K figures are still in our future. Probably even worse than that.
February’s revision was to the downside, but looks stellar in our current situation: +179K, roughly equal to the trailing three-month ADP average. The trailing 12-month average was around +156K. It’s a strong place to have been coming from, especially as late as we were into a bull market — traced all the way back to the early recovery from the Great Recession more than a decade ago. But it’s now history, as a new recessionary period looks very clear from here.
In the March numbers, Goods-producers lost 9K jobs while Services were down twice that much. Small businesses (fewer than 50 employees) have been hardest hit initially, shedding 90K positions last month, while Large businesses (greater than 500 employees) actually gained 56K jobs. Medium-sized businesses grew 7K. Again, this is not reflective on the unemployment carnage to come.
We get a peek at what we might expect in future employment reports — both tomorrow’s Initial Jobless Claims and Friday’s non-farm payrolls, as well as the next few months of employment data — when we look at the ADP breakdown by sector: Trade/Transport lost 37K jobs in March, Construction was down 16K and Leisure/Hospitality -11K. On the other hand, Education/Health Services grew by 48K positions, pretty much in-line with months past. And if there is one sector in high demand at the moment for treating the coronavirus wave, it is in Healthcare.
In fact, places like Amazon (AMZN - Free Report) are likely to hire an increased workforce as more and more commerce is conducted via home computer and home delivery. Pharmaceutical companies taking an aggressive stance against COVID-19 and searching for treatments and a vaccine, such as Johnson & Johnson (JNJ - Free Report) and Gilead (GILD - Free Report) , may also bolster the employment situation, near-to-medium term. But these are sector-specific green shoots; most areas will see massive depletions of workforce.
Pre-market futures are down a half-hour before today’s opening bell, but have come up a bit following today’s ADP data. Currently, the Dow looks to open down 800 points, the Nasdaq -230 and the S&P 500 is trading roughly 90 points in the red. This being the first trading day of calendar Q2, we’re starting off on rather unsure footing. For the quarter just passed, the Dow lost 23.2%, the S&P 500 was down 20% and the Nasdaq -14.2%.
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No Foolin': ADP Report Better than Expected
Wednesday, April 1, 2020
Following an historically sharp sell-off a couple weeks ago in the stock market — spurred by stay-at-home orders by local and state governments to combat the COVID-19 coronavirus pandemic and the subsequent drain on the day-to-day economy — job layoffs took the U.S. from a long-term robust position in its labor market to something much, much worse. Just how much worse has yet to be determined. Analysts were looking toward today’s ADP Employment Report to get a clearer picture.
This brings us to our current good news/bad news scenario: the ADP headline number came out much better than expected at -27K private sector payroll totals; expectations were for -125K. That’s the good news. The bad news is that the ADP sample came a week before the bottom fell out, and those -125K figures are still in our future. Probably even worse than that.
February’s revision was to the downside, but looks stellar in our current situation: +179K, roughly equal to the trailing three-month ADP average. The trailing 12-month average was around +156K. It’s a strong place to have been coming from, especially as late as we were into a bull market — traced all the way back to the early recovery from the Great Recession more than a decade ago. But it’s now history, as a new recessionary period looks very clear from here.
In the March numbers, Goods-producers lost 9K jobs while Services were down twice that much. Small businesses (fewer than 50 employees) have been hardest hit initially, shedding 90K positions last month, while Large businesses (greater than 500 employees) actually gained 56K jobs. Medium-sized businesses grew 7K. Again, this is not reflective on the unemployment carnage to come.
We get a peek at what we might expect in future employment reports — both tomorrow’s Initial Jobless Claims and Friday’s non-farm payrolls, as well as the next few months of employment data — when we look at the ADP breakdown by sector: Trade/Transport lost 37K jobs in March, Construction was down 16K and Leisure/Hospitality -11K. On the other hand, Education/Health Services grew by 48K positions, pretty much in-line with months past. And if there is one sector in high demand at the moment for treating the coronavirus wave, it is in Healthcare.
In fact, places like Amazon (AMZN - Free Report) are likely to hire an increased workforce as more and more commerce is conducted via home computer and home delivery. Pharmaceutical companies taking an aggressive stance against COVID-19 and searching for treatments and a vaccine, such as Johnson & Johnson (JNJ - Free Report) and Gilead (GILD - Free Report) , may also bolster the employment situation, near-to-medium term. But these are sector-specific green shoots; most areas will see massive depletions of workforce.
Pre-market futures are down a half-hour before today’s opening bell, but have come up a bit following today’s ADP data. Currently, the Dow looks to open down 800 points, the Nasdaq -230 and the S&P 500 is trading roughly 90 points in the red. This being the first trading day of calendar Q2, we’re starting off on rather unsure footing. For the quarter just passed, the Dow lost 23.2%, the S&P 500 was down 20% and the Nasdaq -14.2%.
Mark Vickery
Senior Editor
Questions or comments about this article and/or its author? Click here>>
Free Book: Finding #1 Stocks
In this 300-page hardcover, Zacks' Executive VP Kevin Matras reveals almost every stock-picking secret he’s learned from the system that since 1988 has more than doubled the average yearly gain of the S&P 500. Learn more now >>