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    Clues from ADP report ahead of NFP

    The main economic release from the US this afternoon was the ADP non-farm employment change, which is seen by some as a good preview for tomorrow’s key NFP release. Whilst the number of 173k came in ever so slightly below expectations of 174k, when considered against last months 156k - which today was revised higher to 166k - the picture becomes overall more positive. 

    If we look over the past five years it becomes quite clear that the ADP and NFP share a relatively good level of correlation and the uptick in today’s number may lead some to raise their expectations for tomorrow. There has been a noticeable turn lower in both employment indicators over recent month but readings in the 150-200k range still represent a relatively good level of job growth. 

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     With the FOMC’s next meeting under two weeks away now and recent comments from chair Janet Yellen that a "rate rise in the coming months would be appropriate" a strong employment report tomorrow could raise expectations that they will act this month higher. A headline read in the same region as today or higher (170k ) will provide further evidence of a strong labour market and if we see supportive figures in the wage growth then hawks on the FOMC will have far more ammunition going into what could prove to be a pivotal meeting. 

     

    Any person acting on this information does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.


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