September 1, 2021
The ADP private payroll survey isn’t always an accurate predictor of monthly non-farm payrolls, but today’s miss clearly lowers the bar for Friday. The qualitative summary included the following: ‘Our data, which represents all workers on a company’s payroll, has highlighted a downshift in the labor market recovery. We have seen a decline in new hires, following significant job growth from the first half of the year. The delta variant of Covid-19 appears to have dented the job market recovery.’ Dovish takeaways from Powell’s Jackson Hole address last week and unimpressive US macro data have driven outsized gains for long-duration secular growth stocks (large cap Tech) as markets dial back expectations on the pace of tapering. Consensus for Friday’s payroll number remains unchanged at +750,000, but many sell-side economists are penciling-in something more like +625,000. Expect more near-term outperformance from growth sectors if the number comes in below +625,000, while an ‘in-line’ number will likely shift leadership back to cyclical/value sectors.