According to the ADP report, US private employment rose by 206 000 in November, almost twice as much as expected and the biggest increase in almost one year. The previous figure was upwardly revised from 110 000 to 130 000. The details show that strength was mainly based in small firms (110 000 from 67 000), but employment picked also up in medium-size (84 000 from 60 000) and large firms (12 000 from 3 000). The sector breakdown shows that employment rose for the first time in three months in the goods-producing sector (28 000 from 0) of which 7 000 in manufacturing (from -5 000). In the services sector, employment jumped by 178 000 in November (up from 130 000 in October). While part of the stronger figure might be due to the positive development in the claims, we believe that the impact of the claims was be relatively small. Also the details are encouraging. Generally, the ADP report captures the changes in small and medium size firms relatively well, and strength was mainly based in those two groups, boding well for the payrolls. Over the previous months, the ADP report has done a pretty good job in estimating the payrolls, but this hasn’t always been the case and therefore a significant deviation is not excluded. For the payrolls report, we believe that the chance of an upward surprise has increased.
| In November, the Chicago PMI made an unexpected rebound, jumping back to the highest level since April. The headline index rose from 58.4 to 62.6, while only a marginal increase was expected. Also the details are encouraging with an improvement in production (67.3 from 63.4), new orders (70.2 from 61.3), order backlogs (55.1 from 51.2) and supplier deliveries (56.6 from 55.8). Growth in employment (56.9 from 62.3) and inventories (53.6 from 54.4) eased somewhat in November and also prices paid slowed from 66.0 to 60.2. Over the previous months, all regional business confidence indicators improved somewhat, suggesting that activity is picking up again. The progress was not yet visible in the manufacturing ISM, but we believe that also today’s manufacturing ISM will surprise on the upside.