The latest ADP jobs report showing a drop of 32,000 private payrolls in September, supported bets of futher and deeper Federal Reserve rate cuts, but Morgan Stanley is skeptical about the report, pointing to data revisions and benchmarking issues that make ADP an unreliable signpost for labor market trends and continues to expect the Fed to persist with modest rate cuts.
“We are reluctant to rely on the ADP data,” Morgan Stanley’s economists said in a recent report, flagging recent opaque methodology and sharp downward revisions that muddy the waters for policymakers and investors.
The payroll processor’s rebenchmarking to QCEW tax data resulted in an extra 43,000 job drag for September and revised August figures from a 54,000 gain to a 3,000 loss.
Despite signs of cautious employer hiring, Morgan Stanley is wary that the ADP model doesn’t always track well with official BLS data and could be further distorted during periods of government data blackouts.
Others appear to be also looking for a a rebound in job numbers. "We expect that we will see stronger jobs numbers this month," Jefferies said, poinitng to a various factors including the recent decline in continuing claims, which ’offers some evidence that hiring picked up a little bit."
"For specifics, we are expecting a 65k increase in NFP, with a 65k increase in private payrolls and no change in government payrolls," it added with the unemployment rate holding steady at 4.3%.
Even with ongoing labor market deterioration, the economists forecast BLS private payrolls will still rise 50,000 in the next report, and they expect the Fed to respond with a measured approach. “ADP weakness supports cuts, consistent with our forecast for consecutive 25bp rate cuts through the January FOMC. But it doesn’t force 50bps at the next FOMC,” the economics said.
Source :
https://www.investing.com/news/economy-news/private-jobs-sink-in-september-but-morgan-stanley-wary-of-bets-on-jumbo-rate-cut-4267226
