ADP Shows Strong Payrolls Gains, Unemployment Improvement Next

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ADP has released its monthly payrolls report ahead of Friday’s key unemployment and private sector payrolls report from the U.S. Labor Department. The news looks good on the surface, as ADP signaled that the U.S. economy added some 200,000 payrolls in the month of July. Dow Jones was calling for 183,000 and Bloomberg was calling for 179,000 as the consensus estimates.

Before you get too excited, keep in mind that the economic confidence numbers have been mixed. Also keep in mind that if economic news is too strong, particularly on the labor reports, then Ben Bernanke and the Federal Reserve have the justification and ammunition to begin tapering that $85 billion per month in bond purchases. After a while, they will have justification to begin raising interest rates.

In Friday’s big report from the Labor Department, the unemployment rate is expected to have fallen to 7.5% in July from 7.6% in June. Its nonfarm payrolls figure is expected to be up 175,000, and the payrolls from the more important private sector are expected to be up by 187,000, according to Bloomberg.

A last warning that we would signal out there to investors is that the ADP report historically has been more volatile than other reports. Its accuracy also has been called out as not being as representative as the Labor Department readings.

S&P Futures are down one point and the DJIA Futures are down 19 points.