The Source Of The Speculative Bubble

The ADP report showed 517,000 private-sector jobs were added in March which beat estimates for 500,000. It’s interesting that even though this was a beat, it was framed as a soft reading because some are calling for over 1 million jobs added in the BLS report. The consensus calls for 538,000 private-sector jobs added. Clearly, the ‘whisper number’ is higher than the consensus.

Don’t focus too much on one reading. We don’t know whether the labor market recovery will start in earnest in March or April. It doesn’t really matter. All that matters is that the rate of improvement keeps up. This ADP report supports the point that the labor market is adding more jobs than prior months. Job creation is accelerating. As you can see from the chart below, the ADP reading shows employment is 6.97% off its record high. Let’s see what the BLS reading shows on Friday. It might be a little closer to its record.

Job creation was evenly distributed by company size. Small firms added 174,000 jobs, mid-sized firms added 188,000 jobs, and large firms added 155,000 jobs. The goods-producing sector added 80,000 jobs. Natural resources and mining lost 1,000 jobs in spite of the improvement in the energy markets. There hasn’t been a large enough spike in oil prices to see a hiring surge. The construction industry added 32,000 jobs because the residential housing market is on fire. Manufacturing added 49,000 jobs which is in line with the very strong regional Fed reports. It will be interesting to see how strong industrial production ends up being. We could be close to as good as it gets in the cycle for the diffusion indexes.

The service sector added 437,000 jobs. The trade, transportation, and utilities industry added 92,000 jobs. The leisure and hospitality industry added 169,000 jobs which was the highest in this report. That’s actually lower than we expect for the BLS report. Some say the ADP reading is more accurate in surveying restaurants. In the past year, the ADP report has been very wrong most of the time. This report is slowly fading into becoming a non-factor. It’s an educated NFP (non-farm payrolls) guess.

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