US: ADP jobs estimate and auto sales in the limelight – BBH

The ADP jobs estimate and US auto sales may provide some insight into the US economy, but there seems to be an asymmetrical risk, according to analysts at BBH.  

Key Quotes

“Strong data may spur less of a reaction than weak data because of the response to the storms.  ADP showed a 135k increase in jobs in September while the national figure showed a 33k loss.  The median Bloomberg survey forecast is for the 200k increase. To put it in some context, this year's average through August was 221k and last year's average was around 180k.”  

“The key focus for investors is not the number of jobs being created.  It is on earnings and wage growth.  We will write more about it in the weeks ahead, but we suspect that the Phillip's Curve has been prematurely buried and will, over the next few quarters, make itself more visible.  Suffice for the time being to note the importance of wage pressures as a new Fed takes shape early next year, and that the employment cost index (0.8% q/q increase in wages in Q3 or 2.5% year-over-year) has begun accelerating.”  

“Auto sales are expected to have slowed from the storm-inspired pace of 18.47 mln vehicles in September.  Estimates suggest that two storms destroyed as many as 700k vehicles.  They all are not going to be immediately replaced, though clearly some are being replaced.  In the eight months before the storm, the US sold an average of nearly 16.8 mln vehicles a month (SAAR).  This jumped to nearly 18.5 mln in September.  It is expected to slow to 17.5 mln, but the risk seems to be on the upside.  Note that in October 2016, 17.8 mln vehicles were sold, which was the last year until December.”