US: ADP employment report poses upside risks to NFP – Nomura

The research team at Nomura explains that the US May ADP report indicates private sector employment increased strongly by 253k in May, surprising on the upside (Nomura: 190k, Consensus: 180k), following a downwardly revised 174k in the prior month.

Key Quotes

“The strength was broadbased across most sectors despite modest declines in information and leisure & hospitality services. Manufacturing sector employment increased healthily by 8k while mining sector employment increased by 3k. Construction sector employment increased strongly by 37k, rebounding from a small decline last month. Employment in the serviceproviding sector remained strong, adding 205k jobs in May.”

“The ADP report poses some upside risk to our forecast for nonfarm payrolls today. However, note that the difference between the ADP private payroll and BLS’ nonfarm payroll numbers has been relatively large compared with historical averages, with ADP reporting somewhat stronger private payroll growth during 2017.”