Thursday, July 5, 2012

Better-than-expected ADP and Initial Claims ...

June change in ADP came in at 176K, significantly above the 95K consensus.  In addition, May ADP figure was revised up to 136K from 133K.  Whether the June ADP number means that tomorrow’s NFP will be much higher than we expect, remains to be seen; however, the chances of that happening have increased.  NFP could come in between 120K and 150K.  The Street expects 100K; and our estimate is 74K.  We must note that although ADP net change was 133K (original figure) in May, the NFP came in at a very disappointing 69K; but June's surprisingly high ADP cannot be ignored.

Last week's initial claims print is 374K, below the 385K consensus.  In addition, surprisingly, for the first time this year, the prior week's initial claims were revised lower by 2,000.

Although better than expected, the figures above may cast doubt on whether Bernanke will launch QE3.  In addition, China's and ECB's rate cuts, and BoE's additional easing could lower chances of a QE3, as many economists believe that the issue lies outside of the U.S. (EZ and slower growth in emerging markets) and if it is being 'addressed', then no need for a Fed QE3. 

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