Welcome back to cheddar news is closing bell,
everyone well ahead of the labor Department's
august jobs report on friday 80 piecing today
in its own revamp report. That private payrolls grew by just 100 and 32,000
for the month. A drop from july's total of around 270,000 jobs
and a DPS chief economist saying the data suggests to quote shift
toward a more conservative pace of hiring his companies try to decipher
the economy's conflicting signals, end quote.
So what can this report tell us about the state
of the jobs market and is a DPS retool methodology
potentially painting a more accurate picture ahead
of friday's jobs report.
Joining me now is Mark Hamrick,
senior economic analyst at Bankrate Marks always good to see you.
So what are your thoughts on what this ADP number might
mean for the august jobs report that will get on friday
well we like positive numbers first of all, not that that is in question.
I think for the outlook for the Labor Department upcoming read,
but I think if we use the past as a bit of a guide here,
Kristen the ADP data in its previous incarnation was most useful
and sort of pointing us toward the trajectory of jobs creation.
In other words,
if you think of a chart going up or down on a monthly
basis and coming into this august read for the Labor Department data.
We've been on a very strong run,
averaging 471,000 jobs added a month so far this year and you know,
having more than 500 added in 500,000 added in the month
of july so that is a difficult trajectory to maintain.
And so if the ADP data is useful in that way that
is in keeping with the consensus in the sense that we're looking for
something on the order of 300,000 jobs in the government read as
opposed to the more than 500,000 we saw in the month before.
But let's remember if we do get something
that's even close to that consensus reading,
that's a number that under normal
circumstances we would gladly accept particularly
when we're thinking about the fact that the nation's unemployment rate has now
moved back down to that pre pandemic and near 50 year low 3.5%
mark. I know you don't work at A. D. P.
But of course the monthly ADP report always coming
the Wednesday before the friday jobs report is something that
economists all over the place obviously watch very closely
when it comes to moving the market as well.
And so why did A. D. P. From your perspective change its methodology.
And do you think this new methodology is anymore telling gives us any
more of a real picture about the state of the jobs market?
Well that falls into the category of time will tell.
But you know, just from a how do you run your business standpoint?
You can't imagine that they went back and retool this to come up with a worse model.
Uh so I can imagine that they have greater confidence that
what they're generating now is better than what they had before.
But I think Kristin, you know,
I think we need to step back from this just a
bit and perhaps take something that it's akin to the perspective,
at least I had before with respect to this or whether it's the jolts data
that we got on job openings earlier in the week or the weekly jobless claims
that will get in the morning along with continuing claims is we can allow all
this data to reside together uh and understand
that they all tell us different things.
And so when you dig down into the ADP data,
I think it's useful to see for example that leisure and
hospitality continued to be a solid category for jobs creation,
but some of the interest rate sensitive sectors like financial
activities had a minus sign in front of them.
And that makes sense.
And and so I think that could be somewhat instructive
for what we'd be looking for in the labor department.
But we'll just have to monitor in the future months
to see whether this is a true indicator of,
let's say
more than just the trajectory of where jobs creation or hiring is going,
but also that absolute number.
And I would I would tend to be cautious about wanting to
make that kind of a prediction because they're wildly different data sets.
What is this data Mark, tell us about the path forward for borrowing costs.
Well, we know that for example,
the Federal Reserve has essentially put a target on the back of
the job market alongside the elevated and sustained level of inflation.
And and you know, over the past week,
having uh perhaps tried to convert those who were unwilling
to believe that they are truly hawkish with respect to
not ready to pivot to a lower level of interest
rates as soon as people might like early next year.
But rather to say that,
you know that current benchmark level for the federal funds rate at
roughly 2.4% in the midpoint of the range could
easily get up to 44 plus percent next year.
And as we know,
financial markets were reticent about penciling that in as an assumption.
And I think if nothing else,
you know what the Fed has already done is to tighten financial conditions merely
with its rhetoric and that's helping them to achieve part of their mission.
But until they see that inflation has come down over a period of
months that they have clear and convincing evidence as chairman Powell has said,
we're going to be on the up part of the staircase with respect to interest
rates and we should expect to stay at that higher floor in that building.
How do you think americans Mark should be preparing for the rest of the year,
when it comes to job security when it comes
to higher prices and navigating this current economic environment.
Well,
it just so happens chris and we just published
a survey of bankrate that showed in dramatic fashion
that the vast majority of americans have already been taking steps with their
personal finances in response not only to
the current situation with high inflation,
but their fear and their anticipation that there could be
a recession between now and the end of next year.
And number one on their list is they're cutting back on discretionary purchases,
which makes sense because they need to focus on necessities.
And that is something that we heard from basically
one in two american adults that they're doing that.
And when we think about the high cost of energy,
high cost of gasoline in that category.
High cost of shelter,
meaning rents and mortgage payments and of course the higher costs of food
that has a way of focusing your attention on those necessities elsewhere,
saving more for emergencies, saving more for retirement,
paying down credit card debt.
These are all the things that americans have told us they're doing.
And let's bring it back to the jobs report.
Another thing they told us they're doing in lesser number at a lower
percentage is focusing on ways to generate more income and the job market
is a great way to leverage that strength for
as long as we have a low unemployment rate and
we have a mismatch between the number of jobs
that are open and the number of workers available.
All right, Mark, we've got to leave it.
There are always good to get your take, especially on the state of the economy.
That's Mark Hamrick, senior economic analyst
at Bankrate.