ADP Jobs Data Are Now Much More Accurate Than Nonfarm Payrolls

By Peter Tchir of Academy Securities

Total jobs at 253k are very good, but that number came with downward revisions of 149k, which will help keep the Fed at bay. It also makes me wonder why the market doesn’t pay more attention to ADP? Last month ADP was 142k versus an original print of 236k on NFP, which just got revised down to 165k. Two months ago, ADP was 261k while NFP was over 311k, that got revised down to 248k. With low NFP survey response rates and a revised ADP methodology, maybe ADP day should be more important?

As a reminder, this is what the dramatic NFP revisions looks like.

Unemployment rate dropped from 3.5% to 3.4%, though it seems more like a function of rounding than a meaningful drop). The household survey only increased by 139k with civilian labor force declining a touch, hence the move from 3.5% to 3.4% isn’t as strong as it might appear, but it will catch the Fed’s attention.

Earnings could be problematic for the Fed. Last month’s annual rate of 4.2% was nudged up to 4.3% but more importantly, this month showed a 0.5% increase, the largest monthly increase since 0.6% in March 2022! (July 2022 tied at 0.5%). There might be some “devil in the detail” issues with this number, but for anyone not looking at the nuances of the data, this will bring up concerns about inflation and the Fed.

A report, that overall will give the inflation hawks at the Fed some pause, and keeps us in the one and “donish” camp than the definite pause camp.

Banks

Bank stocks bouncing this morning, thankfully, though it might be linked to headlines suggesting that a short sale ban is coming. Maybe it is, and maybe it will help, but my recollection from the GFC and European Debt Crisis, is all that short selling bans do is cause a brief pop as some shorts cover, only to create a bigger problem (a lack of short covering bids) if the problems that started the selling originally, attract attention.

Do Stock Buybacks Trump QT?

I do believe that QT acts as a headwind to asset prices, but as we continue through earnings season more and more companies are announcing their buyback plans. With their blackout periods over, they can initiate discretionary purchases. That is a positive for the market and should, at the very least, neutralize the impacts of QT.

What’s Next For Markets: It’s The “Return Of Buybacks” And “Peak Fed” Vs “Sell In May” And “Terrible Breadth” https://t.co/FUoUEZHWGp

— zerohedge (@zerohedge) April 30, 2023

Where Do Bond Losses Come From?

I’m not sure that I have a cohesive theory or trade on the back of yesterday’s Bond Loss piece, but something tells me it is worth a read as it will gel into a stronger view on tail risk all markets are facing.