Trading Insight Offered by ADP and Challenger Jobs Data

by: Markos Kaminis

Net net, we found the yesterday's labor data negative and ominous. Where a nominal improvement in announced corporate layoffs enthused some, we were unimpressed. We direct your attention, instead, to the implied deterioration in private nonfarm employment. We think the data offers something for the insightful, a warning for Friday.

Challenger Job-Cuts Data

Challenger's Job-Cuts Report came first Wednesday in the early AM hours. There was no forecast available, and so we simply compare the rate of job-cuts versus recent history for measurement of its market impact. Challenger, Gray & Christmas reports that announced corporate layoffs amounted to 34,768 in August. Now, the popular press has jumped all over Challenger's press release, hyping the fact that the layoff count was the lowest in over a decade.

Last month's report for July showed announced corporate layoffs totaled 41,676, and compared against June's 39,358. Is 35K really that much less than the results of recent months? Obviously, that's rhetorical, and I want to also remind readers that we're talking about August, the slowest month for economic activity in America perhaps, if not July. Just as you likely vacationed this month, so did corporate executives, middle managers and human resource representatives. There's clearly going to be less discretionary layoff activity in August. Let's see how September and October shape up before we get too excited here.

And one more thing, less layoffs do not necessarily translate into more hiring, though there certainly should be a relationship between the two. The data is likely having a small positive impact in today's trading, but expect the impact to play no role past the morning trade. This is not a strong positive economic factor for the long-term.

ADP Private Employment Report

The market is always more interested in ADP's Private Employment Report on the day of the two releases. Once again, there is no economists' consensus forecast for the data-point. This data-point is instead compared against forecasts of the Labor Department's data, which will be released Friday.

The news from ADP was bad for August, as it showed the private sector is estimated to have shed a net of 10K jobs. That offers a bad omen for Friday's data, where economists expect census worker layoffs to take overall change in employment lower by 80K. Economists also reportedly expect a private employment increase (ex the census worker and other public sector impact) for August.

July's data was revised lower, now showing an increase of 37K jobs, down from +42,000 at initial report. The report is a negative factor for trading sentiment, because of the fact that economists are reportedly looking for a positive figure for private nonfarm payrolls. The impact here seems minimized in early trading thanks to the Chinese economic data released today, but pay attention to the message this report offers the insightful for Friday.

Disclosure: No positions