3 Numbers: U.S. Job Growth To Pick Up In Today’s ADP Data
James Picerno | Nov 30, 2016 01:31AM ET
- Eurozone inflation pace in November on track to pick up speed - again
- Economists expect US job growth to rebound modestly in November ADP report
- US personal spending and income on track for solid growth in October
Another busy day of economic news awaits, including the flash data for consumer prices in the Eurozone. Later, two US numbers will be widely read: the ADP Employment Report for November, followed by personal income and spending figures for October.
Eurozone: Consumer Price Index (1000 GMT): Inflation in expected to tick higher again in the euro area in today’s flash estimate for October.
If the data falls in line with the crowd’s outlook, the news will reinforce the view that deflation risk in Europe has faded into history.
Econoday.com’s consensus forecast sees the headline consumer price index (CPI) rising at an annual 0.6% pace through last month, up from 0.5% in the previous month.
Core CPI is on track to hold at an 0.8% year-over-year rate, but if the forecast for the headline data is right, the market will interpret the news on the headline change as deeper evidence that pricing pressure is picking up.
It’s debatable, however, if economic growth is accelerating. Although some Q4 GDP forecasts call for a firmer pace in comparison to Q3, yesterday’s sentiment data from the European Commission highlights the mixed messages in the consumer and business sectors.
The EC’s consumer confidence index increased to the highest year-to-date level in November while business confidence eased this month, albeit after sharp increases in September and October.
Meantime, the EC’s November survey numbers reveal that households are anticipating that prices will rise at the fastest annual pace in more than two years.
Economists think that the today’s CPI release will tell a similar story.
US: ADP Employment Report (1315 GMT): Companies in the US are on track to pick up the pace of hiring in November, according to the outlook for today’s report from ADP.
The mildly firmer growth rate that’s expected is still a middling pace in terms of recent history. But an uptick in employment’s trend will support confidence that the Federal Reserve is poised to lift interest rates next month.
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Analysts are projecting private employers will add a seasonally adjusted 160,000 positions in November, according to Econoday.com’s consensus forecast - modestly above the 147,000 gain in the previous month.
No one will confuse the November estimate as sizzling growth, but a gain that rises above the previous month’s increase will at least keep expectations steady for seeing a rate hike in December.
Fed funds futures are priced for a roughly 96% probability that the central bank will announce that it’s lifting its policy rate in a scheduled December 14 statement, based on yesterday’s CME data.
That's not likely to change, according to today’s outlook for the ADP release.
US: Personal Income and Spending (1330 GMT): A strong rebound in the previously released retail sales data for October suggests that a similar narrative will unfold in today’s update for personal consumption expenditures (PCE), which tracks a broader measure of consumption.
PCE’s due for a solid 0.5% monthly increase in October, according to Briefing.com’s consensus forecast.
The estimate’s implied one-year change points to a 4.1% rise - the highest in almost two years.
“Growth is going to remain heavily reliant on the consumer, but consumers are in very good position to lead that charge,” a senior economist at Ameriprise Financial) noted yesterday. “Overall, it’s an encouraging sign for the path ahead.”
Deciding if the outlook for consumption is genuinely rosy may depend on how personal income (PI) is faring - the engine that keeps sales humming. The good news is that the recent revival in PI is expected to roll on in today’s update.
Economists see PI's pace picking up to 0.4% in the monthly comparison, slightly above the 0.3% gain in the previous month. Translating the monthly forecast into annual data implies a year-over-year gain of 3.2%, unchanged from September’s pace.
Note, however, that the annual rate of consumption growth is pulling well ahead of income’s trend. Indeed, PCE’s one-year pace has been running above PI’s in recent months - for the first time in three years.
Is that a sign that the revival in consumer spending is unsustainable? Or is the ramp-up in consumption the start of a new (bullish) era for sales? It’s too soon to say, but this much is clear: The crowd will cheer if today’s numbers match expectations.
Disclosure: Originally published at Saxo Bank TradingFloor.com
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