US: ADP solid, but not helpful ahead of Friday’s Payrolls - ING

James Smith, Economist at ING, notes that the latest US ADP payrolls estimate came in a touch above consensus at 177k.

Key Quotes

“The key thing to know about ADP’s model is that is predominantly a function of last month’s official employment data, which means that ADP’s own up-to-date payrolls data plays only a minor role in generating the estimate. This means that the directional accuracy of ADP as a lead indicator of non-farm payrolls (ie higher or lower growth than last month) is around 50%. We are therefore none-the-wiser ahead of Friday's number, even if at face value, it supports the consensus call of 180k.

We expect job creation to fall short of expectations (INGF 150k), following two months of remarkably strong NFP. But as we noted yesterday, the FOMC would probably be content with such a figure, even if markets may view it as slightly disappointing. As the pool of available labour evaporates, job creation need only keep pace with increases in the overall size of the labour force. Some FOMC speakers have said that they would be comfortable with sub-150k NFP numbers, most notably Vice Chair Fischer who has indicated that 75-150 thousand would be acceptable.”