A reader called Giles asked a good question following this ADP review post,
that is a very interesting view of the jobs market pre and post crisis. Thinking about this, if the jobs market is in line with historical averages then surely the Fed would see that as mission accomplished?
It’s in response to me pointing out that the ADP report is well within historical ranges if you strip out the GFC. Here’s what I was referring to;
US ADP trend 30 10 2013
Now let’s look at Bureau of Labour non farm chart;
US non farm trends 30 10 2013
As you can tell it’s the same story (obviously it’s not going to differ that much given the two views of the same underlying data).
It’s very easy to get caught up in the data from an expectations point of view and that’s something we here at ForexLive try to clarify. We always look through the headlines to see the underlying picture as that is what matters most. The Fed ( and other CB’s) do the same. If we look at the US jobs picture we are well within historical ranges and at any other time would not get so excited over bad and good reports. It’s the fact that the US needs to break historical ranges that has got the markets knickers in a twist. The US needs jobs to be posting 200k plus to make decent inroads into unemployment and economic growth. They haven’t had that consistently over the last 10 years. The most important part is that while the data may disappoint expectations month to month it’s still positive which means jobs are being added and that’s what matters. If it turned negative then the poo would really hit the fan but until that happens all the Fed can do is kick back and wait for unemployment to fall against these lower numbers while pumping the money.
Of course the numbers could, and maybe should, be better given the stimulus but it’s also important to remember that they could also be much much worse.
A final question for you guys to answer just to see if you get our point on watching the trend. If I said that next weeks NFP was expected at +450k but actually came out at +350k would that be a good or bad report?