Back to top

Image: Bigstock

ADP Disappoints at a Quarter-Million New Jobs; Fed On Tap

Read MoreHide Full Article

Wednesday, May 4, 2022

The first of the Big Jobs Reports for this week has come out ahead of Wednesday’s opening bell: private sector payrolls from Automatic Data Processing (ADP - Free Report) for April brought in 247K new jobs, well beneath the 390K or so we were expecting, and even farther from the upwardly revised 479K reported for March. It’s the worst-performing single month in the past year.

This is all relative, however: we’ve been immersed in one of the biggest re-employment booms in American history since the “end” of the pandemic, and in any “normal” cycle, the addition of a quarter-million new jobs in a month would be considered a good thing. It still is: Goods-producing jobs came in at +46K while Services was +202K. Non-farm payroll estimates from the federal government Friday is expected to be around 400K jobs.

The problem, or one of them, becomes apparent when we break down job gains/losses by company size: large firms (more than 500 employees) brought in the lion’s share: 321K, while medium-sized companies (between 50-499 employees) garnered 46K, but for the second time in the past three months, small businesses lost a high number of jobs: -120K in April. Clearly, smaller firms are losing out to incentives regarding healthcare coverage and stock options larger firms can offer, and perhaps the lack of economies of scale is making inflation pressure harder on small businesses, as well.

The usual sectors led the way, but we appear to be dialed back to “normal” growth rates we saw pre-pandemic: Leisure/Hospitality led the way with +77K, followed by Professional/Business Services at +50K, Education/Healthcare at +48K and Manufacturing +25K. Again, these are all consistent with a robust labor market… although as we saw with JOLTS numbers for March yesterday, we’ve still got more than 11 million jobs open in this country.

The International Trade Balance for March has plummeted to a new all-time low -$109.8 billion, below the -$106.7 billion anticipated and the downwardly revised -$89.8 billion reported in February. The appetite for imports in the U.S. has this metric falling off the edge of a table, making the big gouges of the early 2000s look mild by comparison. This trade imbalance is also a contributor to our most recent negative GDP number. Then again, at least there is a consumer appetite in this country these days; some regions don’t even have that.

After today’s opening bell, look for PMI and ISM Services releases for April. These, of course, will precede the report from the Federal Open Market Committee (FOMC), at which time it is expected that we’ll be adding 50 basis points to the Fed funds rate, bringing it to a range of 0.75-1.00%. We’ll also learn what the Fed plans to do with draining the $9 trillion flood in purchased assets during the pandemic, which has yet to be embarked upon.

Pre-market futures are up slightly, for the third day in a row following last Friday’s devastating sell-off into the close of the week. If past is prologue, this bearishness is setting up a short-term rally in the markets by the time of Fed Chair Powell’s presser this afternoon. Then again, it all depends on what actions the FOMC will have taken, and how Powell responds to questions about them. Stay tuned!

Questions or comments about this article and/or its author? Click here>>

Published in