The ADP released its reading for the month of May showing that the private sector added 40,000 jobs to the labor market opposing expectations of a drop to -30K and the previous 10,000 gain which was later revised to 13,000.
The reading comes two days ahead Friday's Job report in which everyone awaits to better get a picture of how the labor market is really doing. But if we look at the ADP readings throughout the previous months we see that it wasn't a good indicator to the Non Farm Payrolls because there were times where they just went two opposite directions and therefore many didn't trust it anymore. Let's also not forget that the ADP doesn't take government jobs into consideration.
Looking further into the market we see that the private sector was the biggest contributor in May as it added 77,000 new jobs while jobs in the good producing and manufacturing sectors fell 37,000 and 26,000 respectively which marked the 21st straight decline.
In another report also, the Non-farm Productivity final reading for the first quarter was revised up to 2.6 percent from the previous 2.3 percent estimation. Now theoretically speaking, with the high productivity, the nation can grow while avoiding inflation which will raise living standards and possibly increase wages without hurting profits. However, it is hard to measure the trend and a longer trend is seen more accurate than a quarterly reading to determine how rapid the nation is growing or slowing.
Among the report a key inflationary measure was released, the unit labor costs, in which they have risen 2.2% on an annual basis slightly slipping from the previous 2.3 percent gain showing that inflationary pressures slightly eased. And this is something bright that people look at coming at a time when soaring food and energy prices are pushing consumer prices to the sky. In the past year, unit labor costs fell 0.7 percent marking the slowest pace since the fourth quarter of 2004.
Finally, the Institute of Supply Management released its Non-manufacturing reading for the US showing that services sector was still expanding as the reading maintained above the 50 mark at 51.7 yet growing at a slower pace than April's 52.0 reading. Median expectations showed that it would slow further to 51.0.
Well here is the first sign where we should be worried about the trustworthy of the ADP as the employment sub-index in the ISM showed that it had fallen to 48.7 in May from 50.8 contradicting ADP saying that the services sector was the biggest contributor to the reading as it added 77,000 jobs. Yet let's not forget the fact that ADP is only private and not public.
In addition, an indication to inflation is the prices paid index which had climbed to 77.0 in May from 72.1 in April showing that inflation has picked up pace and remains to the upside contradicting the 'key inflation gauge' known as unit labor cost.
The only thing I can safely say that was consistent was the new orders which has gained to 53.6 from 50.1 matching yesterday's data concerning factory orders which indicated it had picked up as well. Business Activity also inched higher to 50.6 from 50.9 showing that businesses and companies aren't paring spending as once thought they were.
The markets are still locking the effect of the words said by Mr. Bernanke as they are favoring a strong dollar policy! With the ISM coming in better than expectations, the dollar got a little extra boost yet it was still under a lot of pressure as market players were locking in on profits after the massive gain against majors yesterday. So far what the markets are waiting for is the release of the infamous Job's report at the end of the week to make things clearer about the labor market in which the score is 2 to 1 in favor for a soft labor market with Mr. Bernanke and ISM saying so! Just tune in and wait till Friday to find out the answer