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ADP, Trade Balance In-Line with Expectations

Wednesday, October 5, 2022

Key economic data hits the tape this morning, at a time when pre-market traders were in a mood to give back a good slice of the gains they’d accrued over the past two sessions. But the data, which came in pretty much in-line, does not look to have moved the needle much: we’re still angling to open in the red, after market participants have gauged the near-term levels of overall increases over the past two sessions.

The private-sector payroll report from Automatic Data Processing ADP this morning was slightly above consensus: 208K versus 200K expected. This is also notably higher than the previous month’s 185K new hires. That previous month’s tally was the lowest of the cycle; today’s is second-lowest. From October last year through June 2022, we were 300K+ each month; this new development is actually good news for the Fed in deciding future interest rates.

The strongest gainer by sector last month was Trade/Transportation/Utilities, which takes out the usual suspects Leisure/Hospitality and Professional/Business Services sectors. While the Fed may have preferred to see an even lower overall private-sector jobs number, where we are is fairly Goldilocks for the economy at large, independent of the next Fed move. Information Services and Financials brought up the rear in terms of quarterly jobs.

We also get a new International Trade Balance for August, which came in at -$67.4 billion, slightly improved from the expected $67.7 billion, and notably better than the -$70.5 billion posted last time around. Today’s headline gives us the best trade deficit figures since May’s -$66.6 billion. Obviously, this is still a deep chasm; what’s nice about it is we’re coming at least a little closer to a manageable deficit figure.

After today’s open, S&P Global PMI and ISM Services results will come out, with 49.2 and 56.0% expected, respectively. This shows a fork in the road for current Services business: one above and one lower than the 50 mark. What we ought to glean from this is that businesses in the Services sector are still fighting post-pandemic headwinds; the good news here is there is next to no reliance on foreign markets, at least compared to Manufacturing.

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