FXStreet (Guatemala) – Rob Carnell, analyst at ING explained that Weds’ ADP remains the only even vaguely reliable directional indicator for Friday’s payrolls.
Key Quotes:
“With Fed Vice-chair, Stanley Fischer, hinting over the weekend at his Jackson Hole speech that a September rate hike remained possible (and downplaying what is likely to be a soft CPI release later this week), the market is turning its attention to data relevant to Friday’s all-important labour report.”
“The run-up to this report kicked off today with the August Manufacturing ISM. The headline index fell from 52.7 in July, to 51.1 in August, but the focus currently has to be on the employment index of this survey. This fell 1.5 points to 51.2. Unfortunately, of all the data we have to scrutinise this week, this is perhaps the least useful of all.”
“Changes of the Mfg ISM employment index have a correlation of only 0.3 with changes in the non-manufacturing ISM employment index since January 2013, which should arguably be a more reliable index for payrolls given its broader coverage of the labour market. But even that correlation is the wrong sign, and we should probably ignore it completely.”
“In comparison with the Mfg ISM, its big-sister index, the non-manufacturing ISM has virtually no correlation at all with the directional change in the first release of payrolls changes. Over the same period, its correlation is 0.02 (though we take solace in it having at least the right sign!). In short, today has told us nothing, and may even be misleading. Moreover, the non-mfg index release on Thursday will be only about as useful as tossing a coin.”
“All of which leaves the ADP index on Wednesday as the least worst of a very bad bunch of payrolls indicators (correlation Jan 2013 to present =+0.55). Consensus is looking for 200K, up from 185K in July. Anything either side of that could see big market swings.”
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