Does Recent Lower- than -Expectation ADP Data Signals a Bear Market?

FishPro
6 min readSep 3, 2021

News (Fundamental Analysis)

Private companies in the United States added 374,000 jobs in August, far fewer than expected 600,000 , indicating a slowing labor market recovery amid a Delta variant-fueled COVID-19 surge, payroll data company Automatic Data Processing (ADP) reported Wednesday.

“The delta variant of Covid-19 appears to have dented the job market recovery,” Mark Zandi, the chief economist of Moody’s Analytics, said in a statement alongside the report, adding that the labor market remains strong, but well off its performance in recent months. “Job growth remains inextricably tied to the path of the pandemic.”

In July, however, private companies added a downwardly revised 326,000 jobs , a marked slowdown from the second quarter.

The latest data “has highlighted a downshift in the labor market recovery,” said Nela Richardson, chief economist at ADP. “We have seen a decline in new hires, following significant job growth from the first half of the year.”Despite the slowdown, Richardson noted that job gains are approaching 4 million this year, while adding that it’s still 7 million jobs short of pre-COVID-19 levels.

Large firms and medium-sized businesses hired about 138,000 and 149,000 workers, respectively, while small companies added some 86,000 employees, the ADP report showed, indicating an unbalanced recovery across different company sizes.

As for different fields,production sector recruited 45,000 people in total: natural resources and mining area added 9,000 people; the construction industry gained 30,000 people (in July, an increase of 1,000 people) while the manufacturing business revs up 6,000 people (in July, 8000 people added)

August saw an increase of 329,000 people in the whole services: The employment of trade/transportation/utilities rise by 18,000 (36,000 up in July), financial service climbs 13,000 (9,000 jobs added in July) and professional/business service grows by 19,000(in July, 54,000)

Education and health sector added 5,9000 jobs as some U.S hospitals were flooded by Covid-19 patients and some schools resumed the courses.

(Private Sector Employment Change in U.S Source:ADP)

Service providers continue to lead growth, with 329,000 jobs added in the month, although the Delta variant creates “uncertainty” for this sector, Richardson said, noting leisure and hospitality made up 201,000 of the job gains.

Companies is making efforts on attracting applicants in hopes of filling the unprecedented vacancies,which may be partly impeded by spreading Delta Variant.As Covid-19 resurged in July and August with some 150,000 new cases per day in the U.S,consumers spend far less on dining outside.

Can the upcoming Non-Farm Payroll data turn out to be positive as that of last month?

The weak ADP data may indicate a disappointing NFP.However, the ADP indicator is not reliable since 2021.Market investors are waiting for NFP report that will be announced on Friday. The August NFP may increase by 720,000 with unemployment declining to 5.2% according to estimation by Dow Jones.

The data shows that ADP averaged 495,000 new jobs from January to July while average Non-farm Payroll from the Department of Labor rises by 617,000.The gap between NFP and ADP is particularly large in July:ADP shows an increase of new job at 326,000 while NFP 943,000, approximately 3 times.

The Fed officials are paying close attention to these data who state recently that it may taper the U.S bond purchase if employment continues to grow.Though some 6 million people are unemployed within spreading Covid-19, most officials hold an optimistic attitude toward employment status in the U.S

Some analysts predicts that the Fed may announce the tapering on September and carry out the plan on October.As NFP report shows an increase of 943,000 in July,the Fed is more likely to believe that the economy has achieved “substantial progress”as long as new jobs reached over 700,000 in August.

Therefore, if we take the ADP data as our standard as we did in the last few years, the NFP in August may be disappointing.However, as this year is quite different,the Friday NPF data still has possibility to be surprising.

Technical Analysis

Gold

The recent Gold is fluctuating within the range with increasingly small change.ADP data Wednesday turns to be lower than that is expected and the gold slumps to the previous point after a short-term gain.Investors choose to depart to avoid uncertain risks that may be out of the sharp gap between ADP and NFP.Can NFP this time be a surprising data? From my personal perspective, the probability is small.As the rampant Lambda and Delta variant have obvious influence on the economic recovery.Therefore it is recommended to make high throw bargain — hunting in investment operation.

Crude Oil

Crude oil inventories fell sharply by 7.169 million barrels as of August 27 according to EIA, a drop that exceeded expectation time, acting as a bullish signal.However,as OPEC approved to support the oil production policy,the crude oil market has seen a short decline,indicating a short-term bearish signal.But It will take some time to increase production inventory. Besides, the crude oil has basically recovered from mid-August decline and the further oil supply may be relatively nervous.Therefore, crude oil still has a possibility to go up.Investors can keep the target point at 74 and stop loss if the the price breaks down the lower red support line.

BTC

In the last analysis, we predicated that“ Though BTC keeps in an uptrend, we have to note that the rebounding strength has been increasingly weaker, indicating a need to correct back in short term.” Now our predication turns to be true: BTC retraced back with the bottom of 46278.7. We have reminded investors who make long position around the trending line of covering the position. As BTC is profitable at current status, investors can stop part of limit in the neighbouring high 5054 point ahead.If the further price can break above 51,000 and the pullback does not break down, investors can add positions. There is still an 8- hundred gap between current price and the high point ahead, therefore it is not advisable to make long purchase at current price in short term.Investors can begin position after the pullback fails to break the price middle line in the chart, stop limit around 50,000 and stop loss after plunging down the middle line.

ETH

Similar with BTC, ETH retraced back but does not plunge below 3,00.Recent max rise breaks above the previous fluctuating range with rising strength much stronger than BTC.The long positions held in advance has been stopped limit. The price has tested the resistance zone near 3,800 and there was a pullback. There must be another attempt to break through in light of current ETH trend. It is advised to make long buying in low points. Radicals can choose sell short at current price, cover the position at 3,800, stop limit around3650 and stop loss after the price breaks through and stands firmly at 3806.Long position holders

can make position respectively after the price retraces to 3680,3650, stop limit or reduce position near 3800 and stop loss at 3590.

  • Above is merely personal opinion for reference only

About Author:

Captain wowo,guest commentator of Fish.Pro,has 4-year rich experience in investment practice of both stock and crypto market.Focusing on spot transaction,Captain wowo is proficient at analyzing macro policies and market interpretation and has his own stable trade modes with profound understanding of long-term trades and short-term taste.

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