ADP Jobs Report Comes in Well Below Expectations

Considering that private-sector jobs saw an additional 680,000 individuals added to the workforce in June, July’s number is the lowest number of jobs added since February 2021.

Estimates by Dow Jones anticipated an additional 653,000 private-sector jobs were added in July. According to ADP chief economist Nela Richardson, “The labor market recovery continues to exhibit uneven progress, but progress nonetheless July payroll data reports a marked slowdown from the second quarter pace in jobs growth.”

According to today’s report, the largest gains in private-sector jobs were in leisure and hospitality, which added 139,000 employees. Education and health services added 64,000, and professional business services increased by only 36,000.

The ADP private sectors jobs report collated in conjunction with Moody’s Analytics is always released two days before the U.S. Labor Department’s nonfarm payrolls jobs report. Historically the two reports do not always have a strong correlation. It has been noted by many analysts that numbers obtained in the ADP report can vastly differ from the numbers that are released by the U.S. Labor Department. However, in the case of this year, the two reports have had a much greater correlation than in past years.

The key difference between the U.S. Labor Department’s report and the ADP report is that the Labor Department includes U.S. government jobs added. Currently, forecasts for Friday’s jobs report are anticipating a gain of 845,000 new jobs added in July. If this forecast is accurate when added to June’s 850,000 jobs added, it would mean an additional 1.6 million jobs were added in the last two months.

However, according to Reuters, “That offset the ADP report showing private payrolls rose by 330,000 jobs last month, less than half of the 695,000 that had been anticipated by a Reuters survey of economists.”

According to CNBC, one explanation for the tepid ADP numbers is that new jobs added in July come, “amid concerns that the spreading delta variant could contribute to an overall climate that indicates the post-recession economic boom is slowing. Though the variant’s spread is largely concentrated among a handful of states where vaccinations are low, the total case count has eclipsed the peak of the original Covid spread and is sparking worries that it will slow activity.”

As of 5:24 PM EST gold futures basis, the most active December 2021 Comex contract was trading up $0.20 and fixed at $1814.30. With only fractional gains today, it is the intraday high that is most interesting. Upon the release of the ADP report, gold prices surged to $1835.90 intraday before giving up almost all of its gains to close, in essence unchanged. Since the Federal Reserve uses the data from the Labor Department’s jobs report as a key data set used to shape monetary policy, market participants will focus intently on Friday’s numbers. With expectations anticipating an extremely strong jobs report if the report comes in as weak as today’s ADP report as we could expect the Federal Reserve to continue to maintain its extremely accommodative and dovish monetary policy, which would be bullish for gold prices.

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Wishing you, as always, good trading and good health,

Gary Wagner