U.S. private employers added a scant 38,000 jobs in May, far below economists' expectations and the lowest level since September 2010, a report by a payrolls processor showed on Wednesday.
TOM PORCELLI, CHIEF U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK:
This only adds fuel to the argument that the slowdown story is here in the U.S. I am fairly confident that people are going to be scaling back their estimates for nonfarm payrolls on Friday. While it is a good thing that small and medium-sized companies are adding payrolls, there is no doubt that the pace has slowed. This is exactly what we do not want when other significant data shows things are slowing down as well. Having said that, I still do not believe the Fed will initiate QE3.
DOUGLAS BORTHWICK, MANAGING DIRECTOR, FAROS TRADING, STAMFORD, CONNECTICUT:
With housing numbers, local manufacturing data and now today's employment numbers, we believe the U.S. economy is hitting the brakes at exactly the wrong time for the Federal Reserve. With the expected end of QE2 within reach, the U.S. economy is in a situation where its only form of life support is about to be ripped away from it. Political support for the Fed to continue with QE3 is not here yet, however, with numbers like these, and a sell-off in equities as a result, at some point Congress may grant the political capital to the Fed into to continue to support the economy. The sugar high that has buoyed the U.S. economy over the past six months is wearing out, and there is little in economic growth or foundation to show for it. The dollar has no choice but to weaken.
DAVID KEEBLE, GLOBAL HEAD OF INTEREST RATES STRATEGY, CREDIT AGRICOLE CORPORATE & INVESTMENT BANK, NEW YORK:
Shock and awe. It looks as though the employment market dropped through the floor. It backed down with the rise in the initial jobless claims numbers. This is a real concern.
DAVID ADER, HEAD OF GOVERNMENT BOND STRATEGY, CRT CAPITAL GROUP, STAMFORD, CONNECTICUT:
In recent months, it's been somewhat understating non-farm payrolls but even with a dicey skew this would translate to no better than about a 75,000 private jobs gain. Other employment indicators (also) point to a weaker report including a gain, small, month-on-month in Challenger layoffs, the deeper negative dip in the labor differential and of course claims and the regional ISMs though none are as weak as this ADP suggests.
CAMILLA SUTTON, SENIOR CURRENCY STRATEGIST, SCOTIA CAPITAL, TORONTO:
Obviously a much weaker-than-expected report, hinting that Friday's nonfarm data will also be weaker than expected. It's created a bit of dollar weakness, with the euro edging a bit higher and the Canadian dollar having softened on the view that
anything that bad for the U.S. economy will hurt Canada. We've seen general softening in U.S. data, and that's a concern about how recovery is maintaining itself. Markets are starting to turn their attention to this.
PETER KENNY, MANAGING DIRECTOR, KNIGHT CAPITAL, JERSEY CITY, NEW JERSEY:
Honestly, I don't think the Street is shocked. It fits very neatly in with the puzzle we are putting together that speaks to another soft patch and really, a genuinely failed stimulus approach to growing the economy. And it's not just about jobs -- it's about manufacturing, it's about real estate, it's about consumer confidence. This is one data point in a very broad picture, and it's not encouraging.
WARD MCCARTHY, CHIEF FINANCIAL ECONOMIST, JEFFERIES & CO, NEW YORK:
It is the weakest number from ADP that we have seen in a while. It may mean some downward revisions to Friday's payrolls forecasts.
MARKET REACTION: STOCKS: U.S. stock index futures fall BONDS: U.S. bond prices extend early gains FOREX: The dollar extends losses versus the euro