Favorable ADP Data

June’s private sector payroll report from ADP ADP was released this morning, topping analyst estimates of 151K by posting 172K new jobs last month. May’s ADP tally was revised downward by 5000 jobs to 168K.

The biggest pickup was in Services — up 208K in June, including Trade/Transportation/Utilities up 55K and Professional/Business Services up 51K. Goods fell 36K for the month, with Manufacturing jobs down 21K and Construction -5K. Like last month, these numbers suggest the U.S. remains near full employment.

Weekly jobless claims this morning look to back up this notion, as well. The 254K jobless claims reported for June represents a 16K drop from the revised totals for May. As we are now in the summer months, we may be seeing a skew related to the shortened holiday week, but we nevertheless have not seen new jobless claims numbers in the U.S. since the early 1970s.

Now for the Important Question

So… what does all this mean for tomorrow’s non-farm payroll June Jobs Report from the Bureau of Labor Statistics (BLS)? Most clearly, it continues to advance the narrative that May’s paltry 38K jobs gains was a mere blip, or an aberration. My esteemed colleague John Blank pointed out yesterday to me in conversation that because the May BLS payroll report was released on June 3rd, there may not have been ample time to receive all the data from around the country. It would not be the first time we have seen this sort of thing, either.

This would seem to bear out based on these latest ADP and jobless claims reads, but we’ll know for sure when the BLS report comes out before the bell tomorrow. Basically, another report vastly beneath 100K new jobs for the month of June would signal something is amiss — not least of all the sudden disparity between monthly jobless indexes.

Occam’s Razor is the dictum that the simplest answer to a question is most often the correct one. So instead of attempting to twist our logic into a pretzel that something invisible and destructive in the U.S. labor market is afoot — which by definition could only marginally be affected by Brexit, which didn’t happen until after the May jobs report anyway — we expect to see a big correction on tomorrow’s non-farm payroll totals. That’s what the analysts are betting on, anyway.

Pepsi Reports Earnings

Pepsico (NYSE:PEP) PEP has reported quarterly earnings, topping earnings estimates by 7 cents while coming in more or less in-line on revenues for the quarter. This represents the fourth beat in the last 5 quarters for Pepsico, which before the earnings release was listed as a Zacks Rank #2 (Buy) stock with a Value-Growth-Momentum (VGM) Style Score of B. Read more about Pepsi’s earnings here.


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