We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Yesterday in this space, we discussed new JOLTS numbers for February — roughly flat with expectations, just under 8.8 million openings, with a 2.2% quit rate — but our current Jobs Week really kicks off with today’s private-sector payroll report for March from Automatic Data Processing (ADP - Free Report) . Today’s headline is decidedly hotter than expected: 184K new private-sector jobs were created last month, well above the 155K projected. The previous month’s originally reported 140K bumps up to this month’s estimate, 150K.
This is the highest monthly ADP read since July of 2023, where we saw 307K new private-sector (non-government, non-farm) jobs. The trailing six months prior to March only averaged 127K, which was only slightly above the monthly number of new jobs created to make up for fast-retiring Baby Boomers. The six months prior to that we saw an average 281K new jobs filled in the private sector, so today’s 184K kind of splits the difference. Still, we see big drops across major indices on the news: they had been in the green ahead of the ADP release, but now have all reverted to the red.
Medium-size companies (50-499 employees) saw the biggest number of job gains in this report, around +90K, with large firms right behind at +87K. Small businesses took up the rear, +16K. Unsurprisingly, Leisure & Hospitality led the way with 63K (though we had seen this sector on the wane in recent months), followed by Construction at 33K and Trade/Transportation/Utilities 29K. Professional & Business Services took a break last month, losing -8K positions. These data points mostly illustrate a robust economy in which just about anyone looking for a job can find one.
Perhaps the biggest surprise in this report are the wage increases (of which we’ll likely talk much more on Friday morning, when the Employment Situation report comes out): job-stayers averaged pay growth of +5.1% year over year, whereas job-changers’ wages grew by +10.0% — again, the highest we’ve seen since July of last year. For reference, we had come down to +7.2% for job-changer wage gains. This was another illustration of a cooling labor market overall. But it appears, whether due to an influx of immigrant hiring, minimum wage gains in much of the country or some other reason, that there is still some heat in domestic employment.
This, of course, runs counter to narratives that inflation is being contained to such an extent that interest rate cuts shall commence as of the mid-June FOMC meeting. Currently, the strength in the markets year to date are predicated on three 25 basis-point (bps) rate cuts this year, beginning with June’s meeting bringing rates down to 5.00-5.25%. But if economic data proves resilient amid these higher rates — which we’ve had since last July — then a downward move in June is less than a sure thing, and this is likely to have a negative effect on the stock market.
Bond yields are already reflecting this economic sturdiness, especially on the 10-year, which is inching back closer to 4.4%. The 2-year has been steadier at around 4.7%, though the yield curve inversion, for the most part, has remained at around 40 bps. Currently, pre-market futures are slightly down: the Dow -42 points, the S&P 500 -11 (off all-time highs notched just last week) and the Nasdaq -63 points. For the time being, it looks like we’re still cursed with a good economy. Questions or comments about this article and/or author? Click here>>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Cursed with a Good Economy: ADP Jumps to +184K
Wednesday, April 3rd, 2024
Yesterday in this space, we discussed new JOLTS numbers for February — roughly flat with expectations, just under 8.8 million openings, with a 2.2% quit rate — but our current Jobs Week really kicks off with today’s private-sector payroll report for March from Automatic Data Processing (ADP - Free Report) . Today’s headline is decidedly hotter than expected: 184K new private-sector jobs were created last month, well above the 155K projected. The previous month’s originally reported 140K bumps up to this month’s estimate, 150K.
This is the highest monthly ADP read since July of 2023, where we saw 307K new private-sector (non-government, non-farm) jobs. The trailing six months prior to March only averaged 127K, which was only slightly above the monthly number of new jobs created to make up for fast-retiring Baby Boomers. The six months prior to that we saw an average 281K new jobs filled in the private sector, so today’s 184K kind of splits the difference. Still, we see big drops across major indices on the news: they had been in the green ahead of the ADP release, but now have all reverted to the red.
Medium-size companies (50-499 employees) saw the biggest number of job gains in this report, around +90K, with large firms right behind at +87K. Small businesses took up the rear, +16K. Unsurprisingly, Leisure & Hospitality led the way with 63K (though we had seen this sector on the wane in recent months), followed by Construction at 33K and Trade/Transportation/Utilities 29K. Professional & Business Services took a break last month, losing -8K positions. These data points mostly illustrate a robust economy in which just about anyone looking for a job can find one.
Perhaps the biggest surprise in this report are the wage increases (of which we’ll likely talk much more on Friday morning, when the Employment Situation report comes out): job-stayers averaged pay growth of +5.1% year over year, whereas job-changers’ wages grew by +10.0% — again, the highest we’ve seen since July of last year. For reference, we had come down to +7.2% for job-changer wage gains. This was another illustration of a cooling labor market overall. But it appears, whether due to an influx of immigrant hiring, minimum wage gains in much of the country or some other reason, that there is still some heat in domestic employment.
This, of course, runs counter to narratives that inflation is being contained to such an extent that interest rate cuts shall commence as of the mid-June FOMC meeting. Currently, the strength in the markets year to date are predicated on three 25 basis-point (bps) rate cuts this year, beginning with June’s meeting bringing rates down to 5.00-5.25%. But if economic data proves resilient amid these higher rates — which we’ve had since last July — then a downward move in June is less than a sure thing, and this is likely to have a negative effect on the stock market.
Bond yields are already reflecting this economic sturdiness, especially on the 10-year, which is inching back closer to 4.4%. The 2-year has been steadier at around 4.7%, though the yield curve inversion, for the most part, has remained at around 40 bps. Currently, pre-market futures are slightly down: the Dow -42 points, the S&P 500 -11 (off all-time highs notched just last week) and the Nasdaq -63 points. For the time being, it looks like we’re still cursed with a good economy.
Questions or comments about this article and/or author? Click here>>