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ADP rises 257K in December - looks good, but beware - ING

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 7, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) - Rob Carnell, Research Analyst at ING, suggests that as indicators for payrolls go, the ADP survey is about the least worst of a very bad bunch but at 257K, up from 211K last month (revised curiously to be right in line with the actual payrolls figure for November) this looks encouraging.

    Key Quotes

    “If payrolls were to come in close to this sort of level (+/- 10K), we think financial markets would begin to build a case for a March rate hike to follow the December liftoff. Such a move would be backed by rising inflation, notwithstanding what is currently happening to oil prices - the base effects from last year dominate any current downward pressure on prices. Wages too will likely bolster the case for more tightening (only +0.2%mom needed to take wage inflation to 2.8% in December), and sooner than markets are expecting.

    There is still a long way to go until the March meeting, and we think that by the time we get there, the Fed will have managed to come up with an excuse for dragging its feet some more. But in the meantime, stronger labour data, rising inflation and wages are making a decent case for a more aggressive Fed, a stronger USD, and higher bond yields.

    There is one rather large caveat to all of this. Despite being the least worst of the myriad payrolls relevant labour posts, the ADP is still not very reliable. We won’t really know what payrolls was in December until Friday (and given how prone this data is to revision – perhaps not even then).”
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