September ADP Jobs Estimate and Help Wanted Online

KEY DATA: ADP: 200,000; Manufacturing: -15,000; Construction: +35,000/ Help Wanted: -138,500

IN A NUTSHELL: “Job growth looks like it is still strong so the softening in want ads is somewhat puzzling.”

WHAT IT MEANS: Friday we get the September employment report and unless there is an outsized number of positions added and the unemployment rate falls below 5%, it will not likely cause anyone to think the Fed members would consider raising rates at the next meeting. That said, it could be solid enough to bolster the belief that the FOMC will actually do something, other than creating confusion, at the December meeting. ADP estimated that the private sector added new positions at a solid but not spectacular pace in September. While the manufacturing sector is being buffeted by the fall in energy prices and the rise in the dollar, construction seems to be taking off. There was an oddity that bears watching: The largest firms are the ones hiring. That had not been the case for quite some time. On the other hand, small business job gains were modest. This segment had been critical to sustaining the solid payroll increases we have been seeing. Why this pattern, which is opposite to the norm, occurred in September is anyone’s guess.

While hiring continues unabated, firms seem to be more cautious in advertising their open positions. The Conference Board reported that online help wanted ads fell in September. The level is still really high, so don’t take the decline as indicating the labor market is weakening. But we seem to have hit a lull in the growth of new ads. Firms may be realizing that if they cannot fill the openings they have already posted, there is no reason to advertise lots of new ones. Where are the new jobs? Not surprisingly, in computers, health care and management.

MARKETS AND FED POLICY IMPLICATIONS: The labor market continues to be strong and we are likely to see that on Friday. The consensus is for about 200,000 new positions being added and the unemployment rate staying at 5.1%. That would signal that conditions are solid, even if payrolls gains are not quite as strong as they were last year. Basically, the report would be the equivalent of “more of the same” which for the Fed means they don’t have to make a decision right away. As for investors, they are probably just glad to see the quarter end and hope that the final quarter will be better. Since the expectations are for a non-market moving report on Friday, other factors, such as oil, commodities and international issues should dominate, at least until 8:30 AM on Friday. The one warning I have is that the jobs data tend to have periodic surprises. We haven’t had an outsized move, be it on the upside or the downside, for a while. If I had to guess, a surprise would be on the upside, but I have been too optimistic for several months so I am not putting my estimate where my fears are.