ADP Missing Expectations But Previous Data Revised Higher

Today is the Non-Farm Payrolls (NFP) – due to the 4th of July holiday, the most important piece of economic data out of the United States comes out a day earlier. Released at the same time, the Initial and Continuing Claims will help traders forming a complete picture of the US labor market.  

If we are to have an educated guess following yesterday’s ADP (private payrolls) release, the market is up for a positive surprise. The total employment change in the US non-farm private business sector rose in June – the sector added 2.369k workers.

A Detailed Look at the June ADP Data

Despite millions of jobs being created (or simply people coming back to their old job as economies in many states have reopened), the number missed the forecast. The market expected about half a million more jobs for the June ADP, so that missed number was interpreted as a disappointment.

However, from the May data – it was revised higher. More precisely, from 2.760k jobs loss to 3.065k jobs added. In a way, the revision explains the much-better than expected NFP number last month, that did not correlate with what the ADP showed.

The June ADP number revealed that small businesses added the most jobs, almost one million of them. Within the sector, small businesses with less than nineteen employees are responsible for over half a million of the new jobs reported.

If we look at the job creation by sectors, the services sector is responsible for two-thirds of the new jobs created in June. Leisure and hospitality, education and health services, financial activities, utilities – these sectors added the most jobs within the services component of ADP.

The goods-producing sector also had a good evolution as employment in the manufacturing companies increased by 88k while construction added almost 300k new private jobs. To the downside, the natural resources and mining sector lost over 25k jobs in June.

Moving forward to today’s NFP and Initial and Continuing Claims, traders will focus on any continuity in data. If the NFP disappoints, and the initial jobless claims do the same, then the expectations are that the ADP June number will be revised to the downside next month. However, if both pieces of jobs data today confirm yesterday’s ADP, we may have seen a job market in the United States that turned the corner.

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