Strong jobs growth fires up market

Randall Padilla
June 2, 2017

Private sector payrolls jumped by 253,000 last month, according to ADP, easily surpassing forecasts calling for an increase of 180,000. Economists surveyed by Reuters had forecast jobs gain of 185,000.

"Jobless claims are one of the best real time indicators of the health of the labor market and highly correlated with overall economic activity", writes chief USA economist Joe LaVorgna.

If that's correct, wages should start to rise faster as the economic recovery from the Great Recession hits its eighth anniversary this month.

"It does help indicate continued and increasing strength in the overall US employment picture, which bodes very well for an impending Fed rate hike", Gain Capital's head of research James Chen wrote in a research note on the latest ADP data.

The report, which covers 411,000 firms and 24 million workers, comes before Friday's closely-watched U.S. employment data release, although the two reports can diverge widely.

The strength in America's labor market will likely give the Fed more confidence to raise interest rates at its policy meeting later this month. Weekly claims held below 250,000 in May, which suggests another month of strong job growth.

Broken down by company size, medium-sized businesses hired 113,000 workers last month, while small businesses added 83,000, and large firms hired 57,000, the report showed. The total hiring is up from 174,000 jobs in April and the 255,000 jobs added in March. The education and health services sectors had a robust report, adding 54,000 jobs.

The services sector, as usual, led the way, adding 205,000 jobs, while the goods-producing sector added 48,000.

He added that the federal payroll numbers "are based only on the survey of employers".

The bears were helped in their sales by the ADP employment data from the United States which came in at a much stronger than expected value of 253K which throws open the door for a strong NFP report and hence a possible rate hike in June from the Fed.

Ian Shepherdson, an economist at Pantheon Macro, also sees potential downside risks to hourly earnings, a metric closely-watched for signs of inflation and a key measure for the Fed, given that the survey week for the report - which includes the 12th of the month - was different than the week containing the 15th of the month.

The ADP report covers only private businesses and often diverges from official figures.

Other reports by AllAboutTopnews

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