GBPUSD,H1
The 278k ADP climb in May sharply beat estimates of the 160-70k private BLS payroll estimate with a 180k total BLS payroll gain, after a trimmed 291k (was 296k) April ADP rise that beat that month’s 230k BLS private payroll gain. We now have two consecutive months of outsized ADP gains, which suggests upside risk for Friday’s report. May strength reflected a hefty 110k goods sector payroll gain, thanks to massive increases of 94k for mining and 64k for construction, alongside a -48k drop for manufacturing. We also saw a solid 168k rise for private service jobs, led by a huge 208k increase for leisure and hospitality. By company size, the gain was skewed toward small firms over the past three months, after a skewing toward large firms in February and January. We have a 12-month average as-reported ADP gain through April of 228k, versus a 12-month average BLS private payroll rise of a larger 294k, leaving a downward bias in the available ADP data since the new methodology last August.
Weekly initial claims this week added just 2k to 232k, which was largely expected following claims of 230k last week and 225k in the BLS survey week, leaving a tightening in claims in May. Continuing claims rose 6k to 1.795 million from a 2-month low of 1.789 million in the BLS survey week, leaving that measure below the 17-month high of 1.861 million in April.
Initial claims averaged 229k in May, which sits below the 18-month high for the average of 239k in both March and April, but above prior averages of 221k in February and 201k in January. The 225k May BLS survey week reading sits below recent survey week readings of 246k in April and 247k in March, but above prior readings of 217k in February and 200k in January. For continuing claims, we saw a -54k drop between the April and May BLS survey weeks, leaving the first tightening since September, after gains of 26k in April, 99k in March, 60k in February, and 31k in January. The tight path for claims and today’s big 278k ADP gain suggest upside risk for the 180k May nonfarm payroll estimate.
EURUSD initially dipped to 1.0684 as the ADP number broke, before recovering 1.0700 to trade at 1.0710 currently. USDJPY rallied to 139.90 before declining into 139.10. Cable breached below 1.2450, and trades at 1.2488 now, maintaining it’s fifth consecutive day of gains.
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Stuart Cowell
Head Market Analyst
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