NFP leading indicators: ADP Employment report and ISM Manufacturing PMI hint mixed signals


The US jobs report leading indicators keep showing mixed signals. The two big indicators released today pointed to different trends. The US ADP private employment report estimated a healthy increase of 275K jobs in April, which shows an improvement relative to the 151K in March, upgraded from 129K originally reported. Meanwhile, the Employment Index of the ISM Manufacturing PMI survey showed some moderate retracement in April, falling to 52.4% from the very upbeat 57.5% seen in March.

The ADP Employment Change number is a highly correlated figure to the Non-Farm Payrolls, which might indicate that Friday's NFP number might rise above the the averages of around 200k seen in the current positive employment trend. According to our NFP guide, "investors often consider the ADP report as the harbinger of the BLS release on payroll jobs, the NFP, because of the existent correlation between the two".

On the other hand, the Employment Index of the ISM Manufacturing PMI provides a more specific signal on the status of the manufacturing labor market, which might be taking a small step back after a big surge in March. Our NFP crash course mentions that "some analysts suggest that the Manufacturing ISM has a closer relationship with payrolls, as jobs in this sector can be easier to measure. In contrast, it can be hard to measure jobs in the services sector due to the temporary nature of some of these jobs, remote working etc". This week, the signal shown by the ISM Manufacturing PMI might be stronger as the non-manufacturing index (accounting for around 70% of the US jobs) will not be released until 90 minutes after the jobs report, failing to provide any clue.

These two figures are the sixth and seventh indicators released ahead of Friday's April US jobs report. Yesterday, we saw the CB Consumer Confidence Index rise up to 129.2 in April, a big increase from the 124.2 figure shown in March. That was the third positive signal from our pre-release checklist, which is still quite mixed, with two negative signals coming from the University of Michigan Consumer Confidence and the JOLTS report. Overall, the checklist is still slightly biased to the positive side. Check it out:

Previous Non-Farm Payrolls Positive NFP headline and revision numbers showed moderate progress.
Challenger Job Cuts - To be released on Thursday, May 2nd at 11.30 GMT.
Initial Jobless Claims - To be released on Thursday, May 2nd at 12.30 GMT
Continuing Jobless Claims - To be released on Thursday, May 2nd at 12.30 GMT
ISM Non-Manufacturing PMI Positive ISM’s employment sub-component increased 0.7% from the Feb reading of 55.2%.
ISM Manufacturing PMI Negative ISM’s manufacturing employment sub-component decreased to 52.4% from the Feb reading of 57.5%.
University of Michigan Consumer Confidence Index Negative Retracing a bit from 98.4 to 97.2. Consumer confidence in the UMich survey dipping after the bounce seen after the US government shutdown ended.
Conference Board Consumer Confidence Index Positive Consumer optimism showing great progress in the CB survey, with a rise to 129.2 in April from the 124.2 seen in March.
ADP Employment Report Positive Showing a very positive trend by adding an estimate of 275K jobs.
JOLTS Job Openings Negative Job openings abruptly halted their positive trend with a pronounced dip in February.

 

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