ADP jobs report

The November ADP jobs data was about as expected. The print was 534k vs the estimate of 525k and October was left basically unrevised at 570k. The service sector added 424k jobs vs 458k in the month prior while the goods side contributed 110k vs 112k in October.

Within services, again leisure/hospitality led the way with an add of 136k vs 180k in October, 198k in September and 135k in August. Professional/business services saw a job gain of 110k which is the most since June 2020. Trade/transportation/utilities added 78k vs 80k in October and 69k in September.

For the goods sector, manufacturing hired a net 50k vs 53k in October and 44k in September. Construction added 52k, the same number seen in October and vs 42k in September.

Bottom line, of 19.6mm private sector jobs lost in March and April 2020 we’ve since recovered about 15mm of them. I’ve seen estimates that of this, about 1.5-3mm are people retiring early with the balance impacted by a variety of things. Either way, we know the participation rate has not recovered its pre Covid level and why the labor market is as tight as it is. The result is higher wages and that will only continue I believe. Today’s 534k private sector print is just about where the estimate is for the BLS private sector component of 525k.

As the data was as expected, Treasury yields are about where they were before the number. I do want to emphasize again that there is NOTHING inconsistent with high inflation and the drop in long rates because as said many times here, the yield curve flattens when the Fed is about to tighten or in the middle of a cycle. The question is whether long rates resume upward and the yield curve steepens again will be if the Fed doesn’t try hard enough to counter inflation and the bond market doesn’t it instead for them.