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Home » Online Forex Trading Blog » ADP Employment Report, A Bad Sign?

ADP Employment Report, A Bad Sign?


Definitely, at least this time around.  According to this morning’s report, US private sector jobs were reduced by a staggering 693,000 positions in the month of December, 40 percent higher than previous estimates.  The number dominates an earlier figure in November of 476,000 and sets up for another dramatic non farm payrolls figure this Friday.  Aside from the relationship that the ADP report has with the government release, the sheer number of job losses in the last month of 2008 is greatest seen since the survey began in 2001.

Report Findings

Specifically, the survey continued to show severe weakness in the manufacturing sector as a slowing economy continues to give small and medium sized businesses a reason to shed labor.  If a firm’s bottom line is rapidly decelerating, labor is the first to go.  This is especially true in the services industry which showed the majority of the cuts.  The currently reality is contrary to previous years where December has fared better on seasonal and holiday hiring. For the month, the services sector produced 450,000 plus job losses with a good percentage stemming from financial services.  Unfortunately, as alarming as the report findings are, it tells us that conditions may become worse as a slew of further cuts are expected to arrive in the coming months.  In particular, the announced job reductions from firms outside the financial arena are expected take place in the next two quarters.


Now although there may be some contention on the issue, a relationship does exist between the ADP employment report and the government’s non farm payroll employment report.  Incidentally, the calculations have recently been changed to tighten the correlation between the two.  What does this mean?  It means that the previous estimate of 500,000 or so job loss may be understating the matter and setting the NFP report up to coincide with “whisper numbers” already pitting for a far greater shortfall.  Dare we say a potential 750,000 for the month?  Either way, Friday’s figure will no doubtedly support job losses in the area of 2 million for 2008 and help to set the likelihood of the highest unemployment rate in almost 15 years.

Ramifications for the FX Market

As a result, given the current market dynamic, the pessimistic expectations of the upcoming release are likely to add further downward pressure on the US dollar, giving plenty of support for the Euro and British pound in the near term.  However, given the already pricey runup that has taken place this week, traders will likely not be anticipating explosive upside in either currency.  Rather continued momentum to a more extended intermediate trend.


About the Author -

Richard C. Lee is the Chief Currency Strategist for OnlineForexTrading.com. Employing both fundamental and technical models, Richard has previously been featured on DailyFX.com, Bloomberg, FX Street.com, Yahoo Finance and Trading Markets.com. In analyzing the markets, he draws from an extensive experience trading fixed income and spot currency markets in addition to previous bouts in options, futures and equities.

One Response to “ADP Employment Report, A Bad Sign?”

  1. Highest Unemployment in 15 Years, US Unemployment Rate Rises | OnlineForexTrading.com

    […] Daily Commentary Home » Online Forex Trading Blog » Highest Unemployment in 15 Years, US Unemployment Rate Rises « ADP Employment Report, A Bad Sign? […]

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