Not as accurate as we had thought it appears. Most assume that the monthly ADP employment report is based on actual data from the business sector on jobs additions, merely excluding the government sector, but a good "hard data" source indicative of the Non-Farm Payrolls Report.
We have this piece of information in an email from a capital asset fund manager:
"I just called an economist at MacroEconomic Advisors, the local St. Louis firm that compiles the monthly ADP (private) employment data which was reported today for the month of July. Please keep in mind that this firm has ties to former St. Louis Fed Governor Laurence Meyer. The statistic was a "shocking" +9000 JOB GAIN!!! This promptly pushed the equity futures market (and U.S. dollar) sharply higher at 8:15EDT. The DJIA after a half hour of trading is up 122 pts.
Now, are you sitting down? A component of this very suspicious report showed that Financial firms INCREASED employment by +4000 jobs. I promptly told this "economist" that there was no way in God's Green Earth that banks, brokerages, mortgage companies, and any other financial institutions had increased employment by 4000 jobs in July. He candidly told me that the firm had probably overestimated that sector for many months. Upon hearing that, I asked him why they don't change their methodology in compiling their data? He indicated that they were doing that but that it was a "monumental task!"
So, we have a sharp rally this morning in the equity market and U.S. dollar, based on data that even the reporting firm questions. I think we've seen it all!"
No we haven't seen it all yet. But we're on our way.
ADP Payroll Report or not, this stocks rally is frivolous.
The market was predisposed to rally however, otherwise it would not have. It was looking for an excuse, since the fund managers must have their fatter bonuses, and hot money must be consumed by mispriced beta.
To give the rally a little credit we'd allow that optimists are grasping at straws looking for a turn, a bottom. Some may be sincere in their hopes, like some of the financial media may be. Who wouldn't?
But we are watching people who are most likely about to lose real money, with real consequences, based on a system with too little in the way of transparency and integrity.
Until the banks are restrained and the proper regulation is restored there can be no recovery, no restoration of a sound economy based on sustainable values. We have no objective price discovery mechanism to determine the wheat from the chaff, the flawed from the viable, the foundation from the sand.
