SVET Reports
Wednesday's Markets Update (October 4, 2023)
On Wednesday, the Services PMI reached a neutral level, but the Nasdaq surged, fueled by consumer tech giants like Tesla (+5.9%), Microsoft (+1.8%), and Amazon (+1.8%), as ADP job data fell short of expectations, indicating a significant contraction in job growth and calming Treasury yields. BTC and ETH remained largely unaffected as traders hesitated, awaiting clearer macro signals. In other news, EU central banks plan to monitor DeFi with Atlas.
Details
The ISM Services PMI, a measure of service sector activity, fell slightly to 53.6 in September, but remained above 50, indicating continued expansion. This was the ninth consecutive month of growth for the sector, despite the Federal Reserve's aggressive interest rate hikes. Business activity accelerated in September, while new order growth slowed for the ninth month in a row. Prices continued to rise at a rapid pace, due to higher labor costs and energy prices.
The private sector job growth slowed sharply in September, adding only 89,000 jobs, the smallest gain since January 2021. This was well below market expectations of 153,000 jobs. The services sector led the slowdown, adding just 81,000 jobs. Construction and natural resources/mining also added jobs, while professional and business services, trade, transportation and utilities, and manufacturing all lost jobs. Large establishments drove the slowdown, while small and mid-sized companies added jobs. Annual wage growth slowed to 5.9%, the 12th consecutive monthly decline. Pay gains also shrank for job changers.
Comment
The ADP Employment, created by Automatic Data Processing, Inc. (ADP), is one of the popular sources of private-sector employment data. ADP, a provider of human resources and payroll services, introduced the ADP National Employment Report in 2006. The report aimed to provide timely and accurate insights into employment trends.
ADP's data for the employment indicator is derived from its payroll processing services. It collects and analyzes data from over 24 million employees across various industries, making it a significant source of information on employment trends. It is published monthly, typically a few days before the release of the BLS's employment report. Here are some advantages of ADP reports over those of BLS:
ADP's data primarily focuses on the private sector, whereas the BLS employment data includes both public and private sectors. This means that the ADP indicator can provide a more granular view of private-sector employment trends.
ADP often breaks down its employment data by sector and industry, providing a detailed picture of which sectors are experiencing employment growth or contraction.
ADP's data is based on a substantial sample size, covering millions of employees. This large sample size can reduce the margin of error and improve the accuracy of the employment estimates.
ADP uses consistent data collection methods, which can make it easier to compare month-to-month and year-to-year trends.
While the ADP Employment Indicator does not cover the entire economy (f.e. does not account for the public sector employment) it is much more reliable and comprehensive than a centralized government reporting. It is an excellent example of how entrepreneurs can self-organize and to provide the good quality free-of-charge data without intervention of useless government bureaucrats.
Crypto
The Bank of International Settlements (BIS) is working with central banks in Europe to develop a system to track cryptocurrencies and decentralized finance (DeFi). The system, called Project Atlas, will combine data from both inside and outside of blockchains to create new statistics and vet existing data. The goal of Project Atlas is to better understand the macroeconomic impact of crypto and DeFi.
Comment
Although government 'tracking' always leads to two things—excessive taxation and harmful, useless policing—the fact that EU bureaucrats want to sneak into DeFi means they recognize that DeFi is here to stay. That is positive news.