Gold News

US Jobs Data: ADP vs. Non-Farm Payrolls

Non-Farm Friday starts on Wednesday. Confused? So is Wall Street...
 
JOBS DATA – who can get enough of it? asks Adrian Ash at BullionVault. And your monthly dose of Non-Farm Friday Fun started today.
 
Because it was Wednesday. The first Wednesday of the month.
 
Do keep up. Wall Street thinks this stuff might matter.
 
Friday will see the Bureau of Labor Statistics declare what happened to US jobs in March. But that's a whole four days after the end of the month, and who can wait? Today's private-sector ADP report would give an early clue to that Non-Farm Payrolls figure. Or so many bloggers, finance journalists and analysts thought and think each month.
 
It seems to be the claim of ADP themselves, too.
 
Yet over the last 3 years, the ADP figure for net US job creation has diverged more often than not from the official Non-Farm Payrolls figure released two days later. In fact, it's come within 10%...above or below...only 9 times in 40. 
 
Since January 2011 on average, ADP's figure has been 33% larger than the BLS number each month. Month-on-month, ADP's number has shown growth of 12% versus the 26% of official Non-Farm Payrolls data. Yet over the last year, those trends have reversed...and ADP has lagged the real NFP nine times in 12, reporting 0% monthly growth in net new job creation while the US government's figure shows net hiring expanding by 7.6% each month on average.
 
Confused? So are Wall Street analysts. Despite the gap between ADP and BLS Non-Farm Payrolls data, the Street forecast almost the same number for today and Friday on average...some 195,000 net new US jobs in March on ADP and 196,000 on the official report.
 
Indeed, consensus on the Street keeps confusing ADP with the formal NFP data. Average forecast over the last 12 months saw ADP only 2% larger than the same month's BLS figure. But on out-turn, ADP has in fact been 15% bigger on average.
 
With it so far? Somebody trading Comex futures is. In fact, they think they're ahead.
 
Gold prices jumped nearly $10 per ounce to $1294 going into Wednesday's ADP release. Silver also rose 1% or so, breaking back above $20 per ounce. Because that jump came before the number came out, we guess it was a guess. But today's published ADP number – only just shy of target at 191,000 – could in fact mean Friday's BLS number disappoints the Street.
 
Why should gold or silver investors care? True job creation would be a good thing, of course. But the "hard money" metals are the most sensitive asset prices to changes in monetary policy. And the hot-money's logic says the US Fed is watching jobs data so closely, it could switch tapering or interest-rate policy on a dime, simply because of 1 monthly number.
 
We don't buy it. Nor does the underlying direction in precious metals prices. There's zero correlation between either ADP or official NFP with monthly gold prices over the last 3 years. As in none. And big moves in Non-Farm weeks usually wind up with gold and silver back wherever they were.
 
This volatility doesn't mean much for longer-term bullion prices, let alone the true economic picture. Friday's Non-Farm Payrolls...and today's ADP number by extension...are just key inputs for hot-money traders wanting to turn a fast buck from 1 minute to the next.
 
Investors looking beyond the next millisecond need to get the big call correct, the underlying direction, to grow their money. And a good place to start is ignoring the runaround rush of Non-Farms Friday.

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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