July ADP report show 'weak' numbers

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ADP’s employment report for July showed 167,000 jobs added in the month, way below projections, while the Institute for Supply Management's non-manufacturing PMI inched up, while its employment component slipped.

"Both the ADP private payroll report and ISM services employment index paint a bad picture for the labor market," said Ed Moya, senior market analyst at OANDA. "ADP showed hiring stalled in July, [and came in], much lower than the market forecast, while the ISM services report was mixed, as activity improved but the employment index declined. The upturn in activity is not creating jobs and this could spell trouble for Friday’s nonfarm payroll report."

The 167,000 rise in total nonfarm private employment followed a revised 4.314 million increase a month earlier, first reported as a 2.369 million gain.

Economists polled by IFR Markets expected 1.5 million of jobs added.

“The labor market recovery slowed in the month of July,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “We have seen the slowdown impact businesses across all sizes and sectors.”

Scott Anderson, chief economist at Bank of the West said the ADP report “adds to the evidence the U.S. labor market recovery largely stalled in July.”

“The weak 167k job gain in July highlights the profound hold the coronavirus pandemic resurgence is having on our economy,” he said. “Nearly all major private sector industries saw a large pull-back in job creation or outright job losses last month.”

Scott Anderson, chief economist at Bank of the West

The reversals of re-openings that took place in May and June were a “major factor” as to why there were big declines in job creation in leisure and hospitality, he added.

“But job losses were wider spread than that as sectors such as financial services, information, and construction lost net jobs last month,” Anderson said. “The prolonged nature of this pandemic is expected to do increasing damage to the labor market far removed from the leisure and hospitality and retail trade space.”

ISM’s non-manufacturing sector index rose to 58.1% in July from 57.1% in June, according to data released Wednesday. But the employment index slipped to 42.1% from 43.1%.

Economists expected the index would come in at 55.0%.
“The reading indicates the services sector grew for the second consecutive month after two months of contraction and 122 months of growth before that,” the release said.

The business activity/production index increased to 67.2% from 66.0%. The new orders index grew to 67.7% from May’s 61.8%. The prices index fell to 57.6% from 62.4%, while inventory sentiment decreased to 50.0% from 55.9%.

The supplier deliveries index dipped to 55.2%, from 57.5% in June. Inventories dropped to 52.0% from 60.7%. Backlog of orders increased to 55.9% from 51.9%. New export orders fell to 49.3% from 58.9%.

International trade
The international trade deficit narrowed to $50.7 billion in June from a revised $54.8 billion in May, first reported as a $54.6 billion shortfall, the Commerce Department said Wednesday.

Economists estimated a $50.3 billion shortfall.

Exports in the month climbed 9.4%, or $13.6 billion, while imports were 4.7%, or $9.5 billion higher.

Year-to-date, the deficit is 7.8% lower than the similar period of 2019.

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