James Smith, Economist at ING, notes that the US ADP’s employment survey slightly beat expectations, but they’d caution against using this as a directional indicator ahead of Friday’s labour report
Key Quotes
“The ADP employment survey data just released indicates that 200k jobs were created in March, slightly above the consensus expectation of 195K. Although this will get people thinking about Friday’s labour report, we would caution against reading too much into the ADP number as a reliable directional guide of non-farm payrolls (NFP).
The way ADP calculates the figure is fairly complicated, although it is largely a function of last month’s official payrolls data along with a business conditions index (which is affected by other indicators, such as GDP). Ultimately, ADP’s client payroll data plays only a small part in determining their monthly employment estimate, so the information specifically about March’s labour market performance contained in this figure may be fairly limited.
That said, given the lack of other reliable indicators, this figure will naturally form part of people’s expectations for Friday’s labour report. Although hard to predict accurately, on balance we think payrolls could come in a little below 200k (or around what we believe to be the current underlying trend), although for us the key feature of the report will be wage growth.
We see some upside risk to the 2.2% YoY number (we forecast 2.4%). If this materialises, it could prompt markets to think more seriously about the prospect of a June rate hike, despite Chair Yellen’s dovish comments yesterday – currently markets are looking for one hike in 2016, in November/December.”
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