Horrible Economic Data Continues: ADP Plunges To 38K On Expectations OF 175K; Downward NFP Revisions Next

Tyler Durden's picture

The latest economic data is out and it is horrendous: with expectations for the ADP employment number to come at 175K, following a downward revised 177K print previously, it tumbled to a puny 38K in May. While this number is extremely irrelevant in terms of correlating to the actual NFP number due out this Friday, expect to see a spate of downward NFP revisions on this latest confirmation that the US economy has stalled even with QE2 still in effect for another 29 days (and soon to be extended). From the report: "Today’s ADP National Employment Report suggests that employment growth slowed sharply in May. Employment in the nonfarm private-business sector rose 38,000 from April to May on a seasonally adjusted basis.  A deceleration in employment, while disappointing, is not entirely surprising. In the first quarter, GDP grew at only a 1.8% rate and only about 2¼% over the last four quarters. This is below most economists’ estimate of the economy’s potential growth rate and normally would be associated with very weak growth of employment." Precisely as expected by Zero Hedge.


May’s ADP Report estimates employment in the service-providing sector rose by 48,000, marking 17 consecutive months of employment gains while employment in the goods-producing sector fell 10,000 following six months of increases. Manufacturing employment fell 9,000 in May following seven consecutive monthly gains.

Employment among large businesses, defined as those with 500 or more workers, decreased by 19,000, while employment among medium-size businesses, defined as those with between 50 and 499 workers, increased by 30,000. Employment for small businesses, defined as those with fewer than 50 workers, rose 27,000 in May.

Employment in the construction industry dropped 8,000 in May, completely reversing April’s increase. The total decrease in construction employment since its peak in January 2007 is 2,124,000.

Also, so much for the financial and construction work renaissance:

The only thing now preventing the Fed to begin the push for QE3 is the continuously resilient stock market, which needs to drop at least 15-20% before Bernanke is given a carte blanche. Yet paradoxically, it is stocks' anticipation of QE 3 that makes the actual political case for QE 3 impossible. Geithner upcoming NYT op-ed: "Welcome To The Catch 22."


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Bodhi's picture

Not like you can eat a job anyway.

oh_bama's picture

I knew he is going to talk about the revisions.. hehe


could we have somethign new here??

??'s picture

Rosies' Redemption

Re-Discovery's picture

There IS deflation going on in a big part of the economy.  So Rosie et al are right on that account.  Jobs, homes, small business values.

But there is also inflation based on horrible fiscal and monetary policy that seeks to mask the delfationary effect.  This is the sheer lunacy of the Fed policy.  They have completely missed the investible nature of all commodities now (not as easy in the 70's for retail.)  So end prices are high.  Rosie et al have missed that liquidity exists in all traded markets and doesn't in all others, i.e. higher public stock prices.

Most of the move in most commodities is not demand driven . . . yet.  Because of our previous decade of horrible malinvestment, we will have demand driven price increases eventually.

The moral of the story is monetary intervention does not work to help the economy and can only exacerbate problems.  Unintended consequences will be a BIIIg Bitch this time.

MisterAmbassador's picture

I don't even really consider the deflation - especially in housing - to be deflation.  Those housing prices were artificially inflated with artificially low, centrally planned interest rates.  It only makes sense for them to come back down.

It's just like the inflation in stocks now.  If the Fed wasn't out-of-control, stocks wouldn't be up.  They shouldn't be!  The [real] economy is doing horribly.

Back in the days before my time, if companies or institutions needed to raise money (or so I've been told), they could sell stock to people who actually believed in said company/institution and had a long-term interest in it doing well.  Does anyone really believe LinkedIn will be around in ten years as a profitable endeavor?  Now the stock market is just a casino addicted to QE heroin, only for short-term gains and suckering in the little guy.

We live during a time when it actually makes sense to just scam one another with Ponzi Schemes.

It makes me sick watching all of this.  This isn't Capitalism, but Capitalism is being blamed.  And, there is no way to stop it.

MachoMan's picture

while prices of houses were (are) artificially inflated, we're still experiencing deflation and price decreases in these asset classes...  if that is your approach, there is no inflation or deflation possible...  They are temporary phenomena, but phenomena none the less.

Re-Discovery's picture

Yes.  Inflation/Deflation are just descriptive phrases of what is going on.  Not value judgements on reasons why.  The value judgement is that Fed is wrong.  They think higher stock prices offset lower home prices (and small business values,etc.),  and therefore keep the economy moving forward.

In fact, they are setting up expectations for a huge drop when stocks correct which will self-reinforce economic collapse on the downside.  i expect the Fed will respond by printing which will cause inflation to continue to exist while economy collapses (otherwise deflationary.)  Bernanke's thesis about the solution to the Great Depression are about to be proved horribly wrong.

MachoMan's picture

Bernake was the perfect shill to provide plausible deniability...  when the bush stimulus checks went to pay down debt and not kick start the economy, he had all the information he needed...  after multiple successive attempts, he's apparently still looking for confirmation in good faith?  He never had a reasonable thesis...  he just had something palatable in a world of bullshitting in a captured academic environment...  it is impossible to make sincere theses when your paycheck depends on you doing otherwise.  He has continued to defend himself for the same reason...

MisterAmbassador's picture

Yes, I agree with the technical definition of deflation.  But, to base Fed policy off of that deflation in prices that should never have been that high (trying to get them back up there) is just going to inflate things that were not artificially inflated (at least to such a degree).

You could make the prices go back up by burning down all vacant houses and houses with mortgages underwater.  That would change the actual supply/demand dynamic.

The inflation wasn't real supply/demand driven.  Many peole wouldn't have bought houses or at least such expensive houses, if interest rates were where they should have been.  The deflation is just the correction.

MachoMan's picture

Fed policy is not based on housing...  housing is the smoke screen for the tribute payments to the first tier of our overlords.  If you create policy to help housing, but your only desire is to recapitalize banks and/or give them longer to prepare for the tidal wave, then you have no policy on housing...  you have a policy for recapitalizing banks.  Housing is just being benefitted as an ancillary issue...

And no, even burning houses isn't going to make the prices go up...  I suppose in some incredibly extreme example, possibly, but in our example the wherewithal to pay for houses is decreasing (wages) and demographic factors are incentivizing people to huddle and cooperate in houses together, rather than purely as a solo endeavor (previous boom model)...  not only is there a laughable amount of oversupply, the supply is increasing faster than we have the means to tear them down or burn them...  not that we should do so...  ever...

You're looking at this the wrong way...  THE MASSES WILL ALWAYS GORGE THEMSELVES ON DEBT...  the demand is ALWAYS there by the mouth breathers.  Many people wouldn't have bought houses if there were not government mandates to put them in homes and/or accommodative policies to ensure lenders made loans...  tack on the ability to game the system via lax oversight and you've got a recipe for disaster.  Interest rates are immaterial to people who wander aimlessly through the world but for their consumption.  If interest rates increase, all that means is the monthly payment is more and, therefore, the sale price has to decrease accordingly, given stagnant wages/perpetual inability to pay/save.

Further, higher interest rates would have done nothing to curb deficit spending by our government...  which is ultimately the real story, not housing.

[and no you do not know what deflation is...  (hint: at least make reference to the money supply when you use the term)...  decreases in prices may occur during inflationary as well as deflationary periods].

MisterAmbassador's picture

Whoa.  Getting a little hostile.  Well, there are several ways you can discuss deflation.  You don't need to reference the money supply.  Economically speaking, deflation is a decrease in the general price level of goods and services.

Fed policy isn't based directly on housing, duh.  That's not what I was saying.  But, the falling home prices (which were artificially inflated), are affecting the data (or the equations the Fed uses to arrive at the data they insist on using for policy) and allowing them to make an argument to keep deflation from occurring by using monetary policy.

Velocity of money, etc from a monetarist perspective.  That's fine.

Anyway, while some people or even the masses will borrow and borrow and borrow, they wouldn't be able to do that, if the Federal Reserve didn't give the banks/institutions cheap money to take excessive risks with and those banks/institutions were held in check by by not wanting to lose money, rather than being further encouraged to take excessive risks knowing they were too-big-to-fail and falling prey to moral hazard.

If we didn't have a Federal Reserve setting monetary policy and allowed markets to set interest rates with sound money, then we could just burn down the over-supply.  However, the oversupply wouldn't have developed in the first place.  Markets would keep things moderated.  We wouldn't have these huge bubbles form and then burst.  Those addicted to debt heroin would be cut off much too soon by the lending banks/institutions unwilling to risk losses for huge bubbles affecting the entire economy to form.  Would happen in certain regions, but not the entire economy.  It wouldn't be systemic.

I don't think you can deny there is an over-supply in housing (whether be literal houses or houses that were built too extravagantly).  Trying to increase demand by expanding housing programs and keeping interest rates artificially low doesn't let the housing prices fall to where they should be, given that there is an over-supply.

MachoMan's picture

There have been too many discussions on here about the true definition of inflation and deflation, but I think without a doubt, at this point, given the extrapolations one arrives at because of the definition (see generally big ben), the "general consensus" definition has now proven to be laughably incorrect and the alternative definition of the austrians has become our frontrunner... 

The falling home prices are not affecting the data used by the fed to measure inflation.  You have your cause and effect backwards.  The definition and composition of the metrics change to achieve the fed's and the administration's/congress' policy goals...  not vice versa.

Free markets are like unicorns...  I've never had the chance to see one, only heard about them, and there are no buried unicorn bones to be found.

If the federal reserve did not set rates, do you think that the authority and ability to set rates would be foregone by congress?  Do you think that it would lead to any materially different result?  I think you're overlooking the structural problems with our form of governance...  (two wolves and a sheep without any food trying to decide what's for dinner).  The boom and bust (however they may manifest themselves) would have developed anyway...  and will continue to develop...

Cdad's picture

Now...someone tell my why the XRT has been going ape shit.  Oh yeah, because it is made to be Wall Street's synthetic buyer of all overpriced and soon to be plunging retail stocks.  Never mind.

Cognitive Dissonance's picture

Brother Cdad,

Something needs to do the heavy lifting in the current fraud until the next rotation.

Don't blame the XRT, blame the people manipulating the XRT. :>)

Cdad's picture

Brother Cog,

Indeed...and there are a lot of folk manipulating the XRT.  After all, their task is to make that instrument take them out of ridiculously priced issues like Abercrombie and Netflix...you see.  It takes a village of corrupt criminal syndicate Wall Street bankers to exit profitably on such equity schemes as these, I guess.  As far as I know, you cannot eat a $30 T-shirt or a streaming movie.

As a reminder, and last I checked, there are more shares of the XRT sold short than exist.  It has something to do with creation units machines and selling infinity shares on a finite supply of underlying equity....but I am a little man, not schooled in the ways of criminal syndicate Wall Street banking math...so what do I know?

101 years and counting's picture

i'm shocked, SHOCKED.


PaperBear's picture

Weather was too hot.

Larry Darrell's picture

That will actually be this month's excuse.....


Here is the reason for the past month across the midwest.....




"Whatever you do, don't put the blame on you...." <---Bankster's mantra


flyr1710's picture

it's transitory

FoieGras's picture

Wait a second. Wasn't the ADP "completely discredited" and should be "entirely ignored"? So why should we pay attention now once it reports numbers to the downside?

Tyler Durden's picture

Because to Wall Street lemmings this number is actually relevant. Get it?

in-Credible Banker's picture

So...has anyone run a scatterplot plot of the ADP number to the ensuing NFP number, over time?  Fitted a line to it?  What's the r squared???





tmosley's picture

ADP numbers are always reported here.  They are discredited to intelligent people, but not to the lemmings.

mayhem_korner's picture

Whatever the markets deem as "information" is relevant.

The allure of instantaneous reaction and manufactured arbitrage is trumping fundamental truths and macro analysis.  The Bigger Fool game has been relegated to a 5-minute window.

Alas, one more Jenga block pulled from the bottom...

Everybodys All American's picture

I want someone to defend those dim wits Bernanke and Krugman now.

mayhem_korner's picture

We'll need a medium to summon Johnnie Cochran.

Cognitive Dissonance's picture

Bullwinkle: "Shh, the spirits are about to speak."

JohnG's picture

If it smells like shit, you must convict.

oogs66's picture

if only data mattered, all this ensures is more greek and qe3 rumors...qe2 sucked for everything except stocks and pm's

101 years and counting's picture

38K.  Need ~150K just for new entrants...probablyt 500K in May when college graduates hit the labor force.....




whoopsing's picture

....All those broke-ass kid's with nothing to do ..........

Anaxagoras's picture

Not to worry, BLS will print +250K for May, thanks to its secret job-creating Birth-Death model and its ability to "disappear" another half-million or so unemployed into "marginal attachment."

2DollarBill's picture

Not to worry...just a bit of "softness" related to Japan Effect.

Mentaliusanything's picture

"softness" is everywhere -Australia, China, Europe, Japan - the Germans even have some softness.

Viagra will not do it. 

Ben Bernanke has some powerful voodoo meds (so I'm told) but the cost/benefits are way to rich for all.

youngman's picture

This is a week the Economists will be talking about forever.....maybe its time to change their models.....and how are the Politicians spionning it....good news....saves the enviroment....less CO2...LOL.....and of course gold and silver down....Fiat to the moon

djsmps's picture

After the way the market reacted yesterday, I would expect a bullish day on this news.

PaperBear's picture

A 80% miss on ADP, up will step Sandra Pianalto to grease the skids for further QE.

iinthesky's picture

CNBC word of the day... UNEXPECTED

Temporalist's picture

That has been the word for the past 3 years...that and "Recovery."

Frankie Carbone's picture


Due to unusually bad news in employment, the Dow Jones Industrial Index has temporarily retreated in pre-market hours. 

DO NOT ADJUST YOUR LONG POSITIONS. The Plunge Protection Team is working on this issue and should have it resolved between the trading hours of 10am and 12 noon. 

Thank you for your patience. 

Kind Regards, 

The Powers That Be. 

Frankie Carbone's picture

Follow-up: Looks like the Ponzi Protection Team got an early start. About a 1/3 of the drop (on the news) has already retraced even before the bell. 

Damn these folks have some talent. 

lizzy36's picture

The people demand Mark Zandi:

Zandi said he is still convinced that the economy has enough fundamental strength to pick up speed in the second half of the year when the impact of the Japanese disaster recedes and-hopefully-oil prices decline. "I'm a little disappointed we haven't seen a pick-up in homes sales yet but at least they aren't going down. It's premature to conclude that the housing market isn't going to continue improving ... Most fundamentally American businesses are marking a lot of money. Earnings are very strong. Balance sheets are healthy. It's not a question of ability to hire. It's a question of willingness. ... I think people will feel measurably better a year from now and all the trend lines will be clearly positive."

I think Zandi said the same thing at this time in 2009, and 2010. One expects the hat trick to be completed this time next year.

johngaltfla's picture

Zandi is missing one huge fact; the Japanese crisis is not over. Reactor 1 has melted down literally into a "China Syndrome" style of lava flow and is seeping into the dry well. From there it will melt into the water table and once the steam pressure builds up BOOM again. Not to mention Reactor 5 is acting poorly now and the destruction and contamination of the northern 1/3rd of the Japanese isles is just beginning. Add in the fact that containers were rejected in Belgium and Holland last week from Japan as they were too hot and the problems for the world economy are just starting, not ending.

FWIW, word is plans are being made to evacuate upwards of 70-100K in the northern suburbs of Tokyo soon, so when that starts that will tank their markets totally and take ours with them.

johngaltfla's picture

When rice hits $20 again because of Japan and China, there will be panic. Lots of it.

RockyRacoon's picture

That's nice.  No longer a need for candle light at dinner.  Just relax and enjoy the ambient glow of the rice.