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ADP Lower at +127K, Q3 GDP Upped to +2.9% & More

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Wednesday, November 30, 2022

After two days of milling about, kicking stones and peeking at the goings-on in China, we at last get a pre-market session ripe with impactful economic data: private-sector payrolls, a new Q3 GDP print and trade balance all are out. Pre-markets’ reaction are pretty mute, with the Dow slightly in the red and the S&P 500 and Nasdaq slightly in the green — a reversal of what we’ve seen over the last few trading days.

Private-sector payrolls from Automatic Data Processing (ADP - Free Report) for November came in light of expectations: +127K new jobs were filled for the month, down from the 190K analysts were eyeballing and the unrevised 239K from October. While the Services sector gained a respectable +213K new positions, Goods-producers sank -86K for the month. This is the lowest headline of the year, and more than 3x below April’s cycle-high +457K. It’s safe to say the labor market, at least on the private-sector side, has cooled.

Medium-sized businesses (between 50-499 employees) were not the problem: they brought +246K new jobs in November, whereas small companies succumbed to layoffs, -51K for the month, as did large-sized firms, -68K. This is data we had been more or less expecting, with several high-profile large-cap tech names announcing layoffs in the thousands or even more. This is the first month we start to really see the impact of this data.

Leisure and Hospitality ramped back up to +224K private-sector hires this month, followed by Trade/Transportation/Utilities at +62K (partially benefited by seasonal considerations) and Education/Healthcare with a solid +55K. But Professional/Business Services, which some months led all industries in job gains, was -77K for the month, while Manufacturing dropped -100K positions. This last is definitely a surprise based on other manufacturing employment data we’ve seen over the past several weeks.

Gross Domestic Product for the third quarter of 2022 (Q3 GDP) actually gained +0.3% from the initial read to +2.9%; this was the first revision and second of overall Q3 GDP prints. Consumption grew +0.3%, from +1.4% initially reported to +1.7% today, while Pricing gained +0.2% to +4.3%. The core read — stripping out volatile near-term considerations — reached +4.6%, up from the +4.5% reported in the initial tally.

While these numbers are not what the Fed is looking for in order to reverse course on interest rate hikes — and we’ll hear from Fed Chair Jay Powell this afternoon — we are down notably from peak levels earlier this year. Pricing, for instance, is less than half the +9% we saw in June of 2022, which was the highest print since 1981. Core GDP was +6% in June, the highest since 1983. We are thankfully off those tense heights.

The latest Trade in Goods (Deficit) for October cut deeper than expected this morning: -$99 billion versus a slimmer revision to -$91.9 billion the previous month. Wholesale came in surprisingly higher at +0.8% (+0.5% expected) while Retail investment dropped -0.2% — although we may read this as a good thing relative to the Fed looking for drawdowns in economic activity.

To lasso this whole set of data, we see things continue to steadily move in the right direction for the most part, but — importantly — not skidding so far so fast that a recession is imminent. To be sure, +2.9% economic growth is far from recessionary conditions, as are jobs gains in the private sector above +100K. Thus, while we appear to be staving off a pending slide in the overall economy, we do not expect much by way of shifts to Powell’s perspective this afternoon.

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