Economic indicators impact U.S. Treasuries last week (Part 6 of 8)
The ADP report
The ADP National Employment Report (or NER) showed that the private sector added 208,000 jobs in November. Job additions for October were upwardly revised to show an increase of 233,000, from 230,000 reported earlier. However, September additions were reduced to 213,000 jobs from 225,000 previously reported.
ADP produces the report in association with Moody’s Analytics. ADP uses actual payroll data to prepare this report, which assesses the seasonally-adjusted change in total nonfarm private employment. ADP releases this report on a monthly basis.
Key takeaways
The NER showed that per company size, small businesses with one to 49 employees were the largest recruiters, adding 101,000 jobs in the month. These companies added 103,000 jobs in October. Medium businesses with 50 to 499 employees and large businesses with 500+ employees had additions of 65,000 and 42,000, respectively.
Though medium businesses added jobs in November, the addition was much lower than the 122,000 jobs these companies added a month ago.
Service-providing companies were responsible for adding nearly 85% of the total jobs added for the month. The remaining 32,000 came from goods-producing companies.
According to the ADP NER’s industry classification, trade, transportation, and utilities added 49,000 jobs. It was followed by professional and business services, which added 37,000 jobs in November.
Why is it important?
The ADP NER gives an early flavor of what the nonfarm payrolls may look like. Keep in mind that the nonfarm payroll report has a wider base. The ADP NER only gives you an idea about the hiring activities of the private sector. The Bureau of Labor Services (or BLS) also comes out with private sector employment numbers in its nonfarm payroll report, which includes both private and public sector payrolls data.
A pickup in hiring activity shows an underlying strength in the economy. Companies will begin hiring only if they see an upswing in the goods they produce or the services they offer.
The ADP NER also affects industrials-related exchange-traded funds (or ETFs) (XLI) and (FXR), materials-related ETFs (XLB) and (ITB), and large-cap ETFs (SPY), (DIA), and (IVV).
In the next article, we’ll see how the U.S. trade balance fared for October 2014.
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