Services ISM Beats Expectations While Drop In Employment Index Confirms ADP Beat Was An Aberration

Tyler Durden's picture

Following the too good to be true ADP number, the December Services ISM number came at 57.1 on a 55.7 consensus and an improvement from November's 55- a multi-year high. Yet the usual casual glance behind the scenes confirms once again that disparate economic data series are in complete contradiction with each other: the employment index declined from 52.7 to 50.5, which makes absolutely no sense in light of the alleged surge on ADP service-related jobs. Even Goldman has nothing good to say: "The decline in the employment index, however, suggests that the
strong ADP employment number has considerable statistical distortion
and should therefore be interpreted with care.
" But such is life when one runs a ministry of truth with far too many controllable variables. Furthermore, the economic growth through inventory accumulation is continuing, as inventories increased from 51.5 to 52.5. And most importantly for EPS numbers, kiss those margins good bye: prices paid increased from 63.2 to 70.0. 

Below are the survey respondents comments on the economy:

  • "Overall business climate remains reasonably positive." (Management of Companies & Support Services)
  • "Pricing pressures are starting to heat up." (Construction)
  • "Outlook for 2011 is positive with an increase in spending." (Finance & Insurance)
  • "Looks like more budget reductions are coming in the next year." (Educational Services)
  • "Cotton prices are moving upward, but prices are being kept in line as the overall Asian market cools somewhat."(Retail Trade)
  • "Business picking up for holiday — above expectations." (Transportation & Warehousing)

Summary table:

And most amusingly, Goldman, which was stunned by today's ADP number and said that confirmation of the tremendous beat would be found in the ISM data, has absolutely nothing to be happy about considering the drop in the employment number:

BOTTOM LINE: The ISM nonmanufacturing survey rises ahead of expectations in December, as the indexes for new orders and business activity rise sharply. The decline in the employment index, however, suggests that the strong ADP employment number has considerable statistical distortion and should therefore be interpreted with care.

ISM nonmfg index +3 (3, +1) with +1 judgmental adjustment for strong composition.

ISM index up 2.1 points to 57.1 in Dec vs. GS 56, median forecast 55.7.

1. The ISM nonmfg headline index rises ahead of expectations, up from 55.0 to 57.1 in December. This increase is due to sharp improvements in the index for new orders (up 5.3 points to 63.0) and business activity (up 6.5 points to 63.5). On the basis of this composition, we have judgmentally adjusted the US-MAP reading, which was on the borderline already. The supplier deliveries index eases by 1 point to 51.5.

2. The employment index falls in December (by 2.2 points to 50.5). This decline contrasts sharply with today's upside surprise in the ADP employment report for December-which was mainly driven by gains in employment at service-providing firms-and thus suggests that the ADP surprise should be discounted significantly in considering whether any revision should be made to expectations for Friday's employment report. We continue to evaluate this issue in light of all the new information; pending that review our estimate of a 100k increase in total nonfarm payrolls remains unchanged.

Which is why as we suggested some time ago, the US department of data fudging should import a lot more Chinese individuals who are far better at manipulating bullshit data than the amateurs we have right now.

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Salinger's picture

Rosie turns Bulllish (on Canada) LOL


The usually bearish David Rosenberg is unusually bullish — this time about Canada.

In his Tuesday note to clients, the chief economist at Gluskin Sheff + Associates said the Canadian dollar’s recent surge beyond parity with its U.S. peer, and “unprecedented” discounts on Canadian government debt compared to U.S. Treasuries, is a clear sign investors believe Canada is a safer place to park their cash.

Even though there are legitimate concerns about the overstretched balance sheets Canadian households are carrying,  he said consumer debt levels are “completely serviceable” at the present time.

goldmiddelfinger's picture

will this make gold go up?

HarryWanqer's picture

I wouldn't want to be long gold at this point.  Classic top.

SheepDog-One's picture

You wouldnt want to be long gold? Oh, well when did you sell your gold holdings youre always talking about? In the rear view mirror top Im sure....oh well Harry tell us when youve again went long on gold again, Im sure that will be after the next rip upwards.

ColonelCooper's picture

Goddammit!  You can't even tell all these asshats apart anymore.  Funny though.

vote_libertarian_party's picture

The guy from ADP was releasing the number on CNBC.  As soon as he gave the number he said it looked odd and gave 4 or 5 reasons why it may not be as high as it seems.


Some of his reasons included a 5 week period vs the usual 4 (with a late Black Friday), acctg changes(?), their EOY catch-up adjustments, etc..



Azannoth's picture

So they put All the adjustments for the whole year in 1 month report and got +200k jobs, cool can we get back to PM hoarding now ?

scratch_and_sniff's picture

Friday beckons, i say hold on to your hats, its going to be a hairy one. He is quick to point to the distortion of the ADP, but couldn't it be the ISM thats distorted?

tmosley's picture

Might unicorns really exist?

TheProphet's picture

Can't you just remember the question and answer it then?

Oracle of Kypseli's picture

They are still winning.

But for how long? Is everyone in the business and government blind?

Are they afraid that one negative utterance will collapse the economy? 

Fascism is on the way. 

Oh regional Indian's picture

Very pertinent observation OoK.

There is no bad news. it's only good, gooder and goodest from here on out.

Fascism is already here, it's just wearing a velvet glove right now.

As the saying goes, when the gloves come off....


Oracle of Kypseli's picture

Or you can say the latex gloves come on.

ElvisDog's picture

Just curious, what is your definition of "Fascism"? That term is thrown about willy nilly, but probably 1% of people know what Fascism really means.

Oracle of Kypseli's picture

A political movement, or regime (as that of the Fascisti) that exalts nation and often race above the individual and that stands for a centralized autocratic government headed by a dictatorial leader, severe economic and social regimentation, control and forcible suppression of opposition ©1997, 1996 Zane Publishing, Inc. All rights reserved.

By substitution:

financial regime(as that of the Fascisti) that exalts profits for the elite and the oligarchs above the individual(s) and that stands for a centralized autocratic financial planning government headed by a paid for neutered puppet leader, severe economic and social regimentation, control and forcible suppression of free market and true capitalism 

ElvisDog's picture

You missed the key connection - fascism, as it was originally envisioned by Mussolini is a union of the corporate and government worlds. The government runs the corporations and the corporations run the government. It features a strong central leader and discourages individuality.

Rodent Freikorps's picture

That's bad when the rich are hiring part time gardeners and maids as temps.

Kina's picture

"The decline in the employment index, however, suggests that the strong ADP employment number has considerable statistical distortion and should therefore be interpreted with care." 


Code for 'its complete bullshit manufactured to order' to suite today's kubuki dance.

Boilermaker's picture

Wow...why so harsh?  Everyone makes mistakes...

Boilermaker's picture

Look at the effort to push the markets higher.  Every downward movement is pushed back to parity over and over.

I don't know how anybody with any education can't see that it's completely artificial.  I really don't.

Cognitive Dissonance's picture

The first thing to be blinded when in denial or QE X.x fueled euphoria is the critical eye. To those who want to believe, this is just more fuel for the denial steam engine.  For those who do believe, this is just confirmation. And for those who are on the fence, this is making them nervous.

It's all about belief and not about facts and fundamentals. But that old saying about living by the sword and dying by the sword eventually comes true. Can kicking is all this is.

Todd Harrison was saying back in 2008 that they sold the car crash and bought the cancer. Cancer can take a long time to kill. The powers-that-be are hoping they run out the asset transfer clock before the patient dies.

Boilermaker's picture

I get that; I really do.  But, at some point, it because truly preposterous.  Today's ADP number was only missing a breaking news bulletin with Baghdad Bob (with obligatory beret and gold braided shoulder cords) pronouncing a 'glorious' victory.

Honestly, this is getting absurd and reaching Soviet era bullshit.  I mean, I hope the wheat harvest is more bountiful this year than ever before.

How any objective person, even with bias, can accept this without eye rolling is beyond my comprehension.  Moreover, ADP should have never released it knowing that it's utter bullshit.  But, then again, a company that gets paid on how many paychecks they process (among other services, I'm sure) certainly has incentive to push the pollyanna 'rah-rah' bullshit also.

Bottom Line:  I still don't 'get it' completely.

Cognitive Dissonance's picture

Bottom Line:  I still don't 'get it' completely.

I understand because I feel this way myself from time to time. But then (thankfully) I remember that my cognitive dissonance is hurting because I'm trying to make sense of insanity.

Which if I try too long simply means I'm becoming insane myself. :>)

gorillaonyourback's picture

does any independent institution fact check adp, frb, or other economic indicators.  It would be nice to see that info.  Its kind of currious why the stock market isnt jumping all over the adp numbers or the car sales number.  any comments please

HarryWanger's picture

I can't believe what I'm reading here! ADP number was a blowout, I don't care what you say. Are you blind?

ISM was strong as was yesterday's numbers. We've had nothing but great economic news. There's no way around that. 

Celebrate a strengthening economy rather than trying to find slivers of bad in fantastic news.

goldmiddelfinger's picture

"Are you blind?"

Do we look like Moe Green?

The employment figures were UNCONFIRMED by ISM.


EscapeKey's picture

Yes, Prices Paid going from 63.2 to 70.0 is strongly bullish.

So which side are you on - margin compression, which will lead to bankruptcies and hence job losses, or inflation in consumer prices?

Also, services hiring doesn't exactly agree with the ADP report. Care to comment?

Mrmojorisin515's picture

I will celebrate when we don't have 0% interest rates and mark to market is reinstated harry.  Why should you believe any numbers until those two things are allowed to return?  Harry you lack any principles, the economy is your god and i'm sure you'll find a warm place in hell

SheepDog-One's picture

HarryWanker and his imaginary consumer product company...LULZ. Hey Harry, as Chief Dan said...'If its so good, then YOU drink it'!
Go buy stocks Harry no one here is stoppin ya!

TruthInSunshine's picture

'Hairy Wang's Urinal Cake Company'

Cognitive Dissonance's picture

Now that had me laughing out loud and for a long time. :>)

Ferg .'s picture

It's not about trying to find " slivers of bad in fantastic news. " It's about putting data in proper perspective . In and of itself the ADP figure was indeed a blowout . However , that spike should have been confirmed by the ISM Services Employment Index . It wasn't , and in fact there was a significant disparity . That casts doubt on the credibility of the ADP number .

tmosley's picture

Unicorns and lollypops are here again!

Best sell that gold Harry!

huggy_in_london's picture

Why are people junking this?  Traders trade, the facts are changing... don't be so stubborn you people as to be blinded by your own views!!  And Wanger is right re gold ... classic double top.  And broken the big uptrend line.  Just be cautious you longs....

goldmiddelfinger's picture

2. The employment index falls in December (by 2.2 points to 50.5). This decline contrasts sharply with today's upside surprise in the ADP employment report for December


Somebooby's got some 'splain' to do

erik's picture

the USD just regained its 50 day MA.  that is a huge caution for all commodities, including gold and silver.  dr. copper is also suggesting a pullback is imminent, as it has led the stock market by 1-2 weeks before pullbacks.

if the USD consolidates here above 80 for the next couple of days, then look out above, and look out below for commodities and stocks.

Ragnarok's picture

Euro weakness is the driver, and I agree that there could be a larger pull back in metals.

erik's picture

Ragnarok, i don't know that it is Euro weakness per se, as the Swiss Franc and Japanese Yen are getting hammered too versus the USD.

I think what we are going to witness is the money in commodities based on fear of USD/Fed policy will come flooding out now that a jobs number came in very high. 

How much money was sitting in commodities as a safeguard against the USD and Fed policy?  Now that we get positive employment news, the rush for the exits will begin.  Case of too much bullishness on commodities, too much bearishness on USD.  it'll make for a strong correction over the next 1-2 months.

goldmiddelfinger's picture

Think commods should get ripped as deflation is masked by Chinese panic over industrial metal supplies.

erik's picture

Is that a statement or question, goldmf?  Can you elaborate?

Also, you keep making reference to DeMark monthly setups.  Where are you getting that info?

SheepDog-One's picture

Euro turd lack of flotation causing USD turd to float a bit higher for the moment.

erik's picture

I really don't think it is the Euro.  Spain bond spreads are tightening.  Of course, that is because the ECB has made it so and will probably continue to do so.  Other Euro bond spreads are either going sideways, or very mildly tightening.

This is the beginning of a potential USD short squeeze.  If the USD consolidates above 80 the next couple of days, then I expect buying will really ramp up over the next 1-2 months.

Stocks can potentially move higher near term on funds from US treasury sellers, thanks to the employment number beat, but even they will succumb when the USD takes off.

SheepDog-One's picture

As long as its remembered the ONLY thing that matters now is the FED bankers 'assets' in trillions worth of stocks and bonds theyve been buying. Inflation or deflation is only in reference to inflation of their worthless MBS and UST purchases which theyll now fight to the death to defend. If Bernanke sees 'deflation' (that means the FEDs asset value is goin down) he'll do all he can to plunge the dollar...its all about devaluing the dollar. At some point this will lead to a world war, as history shows.

erik's picture

Sheep, I agree the long term implications of all of this are dire.  The Fed will implode eventually.  I am speaking more in the 1-2 month range. 

I think FCX is a magnificent short if the USD consolidates above 80 the next couple of days.  Both it and copper led the Jan'10 and Apr'10 corrections.

gorillaonyourback's picture

i hear you harry BUT commodity prices down, employment up, cars sales up,  STOCK DOWN. make any sense?