Here's Why a Blowout ADP Jobs Report Couldn't Boost the Dow Past 17,000

Investors are still waiting for the official data, and ADP seems to be overcorrecting the mistakes it made last month to reach its surprisingly high figures.

Jul 2, 2014 at 4:46PM

The further away we get from the abysmal first quarter, the less likely it seems to be repeated. This morning, Automatic Data Processing (NASDAQ:ADP) released its private-payroll update for June, providing another round of economic data in support of the idea that first-quarter GDP was a weather-wracked outlier.

The report shows addition of 281,000 private-sector jobs last month on a seasonally adjusted basis, boosting the three-month average for job growth back up over 200,000 -- for only the fourth time in the past year -- and returning that average to levels not seen in more than a year. The latest ADP figures also blow the doors off of most economists' expectations, and show that more jobs were created in June than had been created in any one month for nearly two and a half years.

Adp
Source: Automatic Data Processing.

More construction jobs (36,000) were created in June than had been created in any one month -- except December 2012 -- since 2006. This resulted in the second-fastest rate of month-over-month growth in construction jobs since ADP began tracking jobs numbers in 2001. White-collar work also enjoyed its largest one-month job surge (77,000) since early 2012:

Adpmonthlysectoraddsjune
Source: Automatic Data Processing.

ADP found that midsized businesses, which employ between 50 and 499 people, added 115,000 new jobs in June, which is the highest rate of midsize-business job growth since 2007.

Admfirmsizemonthlyaddsjune
Source: Automatic Data Processing.

In many regards, this jobs report confirms what a large number of economists believe: the American economy is rebounding rapidly from a lousy winter. Despite this good news, major indices were largely unchanged -- the Dow Jones Industrial Average (DJINDICES:^DJI) finished at 16,976 points to record a 20-point gain for the day, an improvement of 0.12% over yesterday's record close (and thus a new all-time high close in its own right) but not enough to move past a largely meaningless 17,000-point barrier. Without a 1.1% gain from IBM (NYSE:IBM), its second heaviest-weighted component, the Dow would probably have finished in the red even though 16 other components closed in positive territory today.

Analysts and market-watchers are increasingly learning to ignore the ADP jobs update in favor of the Bureau of Labor Statistics' official monthly report, which is scheduled to be released tomorrow. Last month, ADP came in far below expectations by reporting a mere 179,000 new jobs, which turned out to be well below the 217,000 new jobs -- enough to set a new employment record -- reported in BLS data a mere two days later. The gulf in ADP's jobs numbers from May to June, and the discrepancy between ADP's data and the government's figures, probably point toward a lower number of new jobs for June in tomorrow's BLS report.

MarketWatch's average of economist projections points to a gain of 215,000 new jobs in the June BLS update, while Dun & Bradstreet estimates we'll see 244,000 new jobs. This is more or less in line with the slow-and-steady progress the American economy has made over the past few years, and it's nothing to get excited about, which certainly explains why the Dow barely moved today. We'll see if things are really getting better on the job front soon enough.

You can't afford to miss this
"Made in China" -- an all too familiar phrase. But not for much longer: There's a radical new technology out there, one that's already being employed by the U.S. Air Force, BMW and even Nike. Respected publications like The Economist have compared this disruptive invention to the steam engine and the printing press; Business Insider calls it "the next trillion dollar industry." Watch The Motley Fool's shocking video presentation to learn about the next great wave of technological innovation, one that will bring an end to "Made In China" for good. Click here!

Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.

The Motley Fool owns shares of International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers