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ADP employment report points to rebound in October NFP; trade deficit shrinks in September

The ADP national employment report pointed to another strong month for US jobs in October. The latest ADP employment change reading came in at 182,000 in October, slightly above estimates of 180,000. The figure was weaker than the 190,000 new jobs added in September, which was revised down from initial estimates of 200,000.

Employment rose in all sectors during the last month except for manufacturing, indicating the sector continues to struggle from weak exports. The biggest jobs gains were in the construction and trade/transportation/utilities sectors. Small businesses added the most jobs but medium and large business also saw positive change over the month.

The ADP measure of employment change is often seen as a good indicator for the nonfarm payrolls data released a few days after as the two are closely correlated. However, in recent months, nonfarm payrolls has come far below the ADP measure. September’s surprisingly weak nonfarm payrolls change of 142,000 came after another weak month in August. This led to concerns that the US job market is slowing and that it may deter the Fed from raising rates soon. Friday’s jobs report is forecast to show nonfarm payrolls increasing by 180,000 in October.

In other data released today, the US trade balance improved in September with the deficit shrinking from an upwardly revised $48.0 billion in August to $40.8 billion – a 5-month low. Exports rose by 1.6% but were still down by 3.8% in the first nine months of the year. Imports fell by 1.8%, mainly due to a drop in crude oil imports as a result of lower prices.

The smaller deficit is unlikely to make a significant impact on GDP though, as for the July-September quarter, the deficit was still 3.6% higher than a year ago. With the slowdown in emerging economies and a strong dollar expected to continue to weigh on demand for US goods, the outlook for exports is likely to remain bleak for some time, therefore making a negative contribution to GDP growth.

The dollar advanced to 121.40 yen after the data, extending the day’s gains. The strong greenback put further pressure on the euro, which fell to 1.0904 dollars. Cable was also weaker, dropping to 1.5397.

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