Article / 05 October 2016 at 5:00 GMT

3 Numbers: US jobs growth expected to ease in ADP's September report

editor/analyst / CapitalSpectator.com
United States
  • Economists project slightly softer rate of growth for UK Services PMI in September
  • US jobs growth in September set to ease via the ADP Employment Report
  • US ISM Non-Manufacturing Index on track to rebound after sliding to six-year low

By James Picerno

The pace of economic releases picks up today, including the September figures for the UK Services PMI. Meanwhile, the state of the US economy in September is in focus via the ADP Employment Report and the ISM Non-Manufacturing Index.

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US jobs growth is anticipated to have eased in the September report. Photo: iStock

UK: PMI Services Index (0830 GMT) UK economic sentiment has beat expectations in two reports this week. Will today’s September update of the Services PMI make it three in a row?

The week started out on a strong note with the Manufacturing PMI for last month. Economists were projecting a modest dip, but the index posted a sharp gain.

Yesterday’s Construction PMI for September delivered an upside surprise as well. Instead of wallowing just below the neutral 50 mark, as analysts expected, the index jumped to 52.3, marking the first growth reading since May. “A number of survey respondents noted that Brexit-related anxiety has receded among clients, although it remained a factor behind the ongoing decline in commercial building work,” a Markit economist noted.

Meanwhile, the International Monetary Fund yesterday raised its growth projection for Britain in 2016 to 1.8%, up slightly from the July estimate. In contrast to an array of pessimistic forecasts for the country following the June vote to leave the European Union, the IMF now expects that the UK will avoid a recession and post the strongest growth this year among the G7 nations.

What’s the crowd expecting for today’s update of the Services PMI for September? Ecnooday.com’s consensus forecast sees a dip to a modest growth reading of 52.0 vs. 52.9 previously. If the releases from earlier in the week are a guide, however, another upside surprise may be near.

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US: ADP Employment Report (1215 GMT) Analysts are anticipating that jobs growth will continue to cool at the end of the first quarter.

The monthly change for today’s September release of the ADP Employment Report is on track to ease to a 170,000 increase for private-sector employment, according to Econoday.com’s consensus forecast. That’s a respectable advance, but a softer gain will stoke questions about Friday’s official payrolls release.

Recall that the government reported that August payrolls in the private sector advanced at a substantially slower pace, rising by only 126,000 – well below expectations. ADP’s August estimate was considerably higher, but today’s report is on track for another round of deceleration.

Meanwhile, Federal Reserve Vice Chairman Stanley Fischer yesterday said that “with unemployment now below 5% we’re beginning to see the fruits of a higher-pressure labour market.”

The markets will be keenly interested in learning if “the fruits” are starting to look a bit ripe in today’s ADP report.

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US: ISM Non-Manufacturing Index (1400 GMT) Is the services sector regaining momentum after stumbling in August? The previously released flash PMI data for September hint at the possibility. Markit’s preliminary estimate for last month reflects a modest rise, lifting the Services PMI to a five-month high. But there was a caveat too.

“Although business activity showed the largest monthly rise since April, inflows of new business slowed and employment growth was the weakest for three-and-a-half years,” Markit’s chief economist said last week. “A drop in optimism about the year ahead to a near post-crisis low meanwhile cast a shadow over the outlook.”

Maybe so, but economists are expecting that today’s ISM Non-Manufacturing Index will tick higher for September, rising to 52.9 from 51.4 previously, based on Econoday.com’s consensus forecast. (Markit also publishes revised PMI figures for September at 1345 GMT).

Growth is still expected to remain sluggish for services. Indeed, the August reading of the ISM Non-Manufacturing Index slumped to a six-year low. But barring a sharp downside surprise, today’s sentiment updates are expected to reflect a bit more strength in economic activity at the end of the third quarter.

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– Edited by Gayle Bryant

James Picerno is a macro analyst/editor at CapitalSpectator.com. Follow James or post your comment below to engage with Saxo Bank's social trading platform.
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