NEW YORK (Reuters) - Private employers added 135,000 jobs in May, falling short of economists’ expectations, a report by a payrolls processor showed on Wednesday.
Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 165,000 jobs.
As well, April’s private payrolls were revised down to an increase of 113,000 from the previously reported 119,000.
“That expectation of tapering is probably going to be pushed out a little bit, that’s why right now we’re seeing that Treasury yields are a little bit lower and the dollar a bit weaker.”
ANDREW WILKINSON, CHIEF ECONOMIC STRATEGIST, MILLER TABAK &
“We have been seeing significant differences in ADP and nonfarm payrolls for months but regardless, it still doesn’t suggest that the labor market is strong enough for the Fed to start tapering.”
“Not great. Bad news is good news in this market lately because it keeps the Fed accommodative, buying bonds and interest rates low. We’ve seen quite a run in rates as well, in other words yields up and prices down. This could be the type of number that maybe begins to reverse that somewhat.
“The employment gain was below expectations and below the run rate of the first quarter. The rest of it actually looks the same, most jobs came from smaller businesses, most came from the service sector. We continue to see expansion of the workforce, job market, but growth has slowed since the beginning of the year and it is pretty much everywhere.”
“That moderate rate of hiring comes as little surprise to us, given an economy on track for sub-2 percent growth over the quarter. We were already looking for a below consensus reading on Friday’s payrolls, and while the ADP is not always a reliable guide, it could have others scaling back their forecasts as well. Should a similar trend be repeated on Friday, it will also diminish fears of an early tapering of QE.
“The detail showed a further decline in manufacturing employment, in line with the recent trend and evidence from business surveys. The bulk of the hiring came in professional/business services and trade/transportation services. The below consensus print could support fixed income and weigh on the U.S. dollar.”
“It is reflective of the continuation of the soft patch that the economy has been going through, but looking forward it seems that we’re starting to gain a little bit of traction, and most importantly that’s been most evident in consumer spending and consumer attitudes.
“I tend to think that Friday’s report will be a little bit weaker than what expectations are forecasting, which are right around that same level of 165,000 that people were looking for in ADP.
“So I think it will be a little weaker, because I think it’s too early to expect an improvement in the labor market in the month of May. We’ll begin to see that in June and it should begin to gain traction in July and moving beyond.
STOCKS: S&P 500 futures fell 6.9 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration of the contract. Dow Jones industrial average futures lost 51 points and Nasdaq 100 futures declined 12 points.U.S.
BONDS: U.S. Treasuries prices extended gains. The benchmark 10-year Treasury note, up 5/32 of a point before the report, was up 12/32 afterwards, leaving its yield at 2.11 percent, down from 2.15 percent late on Tuesday.
FOREX: The euro hit session highs against the dollar at $1.3114 after the report and was last at $1.3086, up 0.1 percent. Against the yen, the dollar hit the day’s troughs of 99.13 yen and last traded at 99.50, down 0.5 percent. The dollar extended losses versus the yen, the euro rose
GRAPHICS: ADP vs. the U.S. Labor Department: The ADP National Employment Index shows an increase of 135,000 private sector jobs in May - 45,000 fewer than analysts expect Friday's Labor Department report to show. link.reuters.com/fex44t
Americas Economics and Markets Desk; +1-646 223-6300 nL1N0EH0KD