ADP said 235k private sector jobs were added in October, 35k more than expected. This was mostly offset though by the 25k downward revision to September to 110k. So, a touch better than expected all in. ADP does include those that still have a job but didn’t get a pay check during the survey period when the hurricanes took place, unlike the BLS. There was likely some hurricane hiring though that took place to rebuild as construction added 62k jobs vs 32k in September and 21k in August. Manufacturing added 22k jobs vs 12k in September and 24k in August. The services sector contributed 150k jobs vs 65k last month and vs 182k in August. Smoothing everything out has the average job growth year to date for this measure of the private sector at 212k vs 181k in 2016, 206k in 2015 and 237k in 2014. The slight moderation should not be a surprise as there is less labor supply at this point of the cycle. As the data was about as expected, Treasuries, while lower, are little changed immediately in response.
Take note too of this commentary on the labor market and further signs of rising wage pressures which I quote from the Almost Daily column from Grant’s Interest Rate Observer (which is given out for free via email each day) last night:
“Fast casual dining chain Texas Roadhouse, Inc., which employs about 52,500 people according to its most recent form 10-K, provided investors with an eye-catching data point in yesterday evening’s third quarter earnings release. In its full-year outlook, management raised its forecast for labor inflation to a range of 7% to 8%, up from previous guidance of mid-single digit growth. A decline in third quarter restaurant margins was likewise attributed to the higher costs associated with compensation increases.”
“Chief financial officer Scott Matthew Colosi noted the broad-based advance in wages on the earnings call: “All over the country, you hear how challenging it is with unemployment being so low to – you’re competing for talent. And so you’re having to pay almost in every position more than you did even a couple of years ago.” Tonya Robinson, vice president finance and investor relations, added: “And actually, you hear more and more people talking about that even outside the restaurant industry.” Chris Kempczinski, president of McDonalds USA, LLC proffered a similar observation on Oct. 24: “There is some commodity inflation, but the biggest drag that we’re facing right now is related to the labor investments that are being made.”
This again helps to explain why the Fed will keep raising interest rates in 2018 after one more this year in December.
Completely separate from the jobs data, I mentioned yesterday that Hong Kong was voted the most unaffordable housing market in the world. Well, check out this story today.