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Obsessed With Acronyms
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A simple three letter acronym generated a lot of excitement before the bell yesterday on Wall Street and at CNBC.

The buzz continued throughout the day after ADP, Automated Data Processing, released its monthly employment numbers at 8:15 in the morning, ET. The announcement of only 491,000 possible job losses in April lifted the futures and kicked off bullish activity on the floor of the New York Stock Exchange and NASDAQ.

Of course the number, much lower than expected especially after months of numbers exceeding half a million monthly losses, was viewed as a positive sign. A perceived reversal in the unemployment numbers and on the floors of the markets a cause for jubilation.

But that enthusiasm may be premature. ADP’s monthly figures have been notoriously lacking in accuracy. Their monthly computations over the last six cycles have been notably large misses, but on either side.

In November ADP reported job losses for the month would be 250,000. Their estimate was only off by 283,000. Losses in November were actually reported two days later as 533,000. That figure has since been revised to 597,000 raising the miss to a mere 347,000 additional lost jobs.

They weren’t anymore accurate in December missing by 169,000 in the opposite direction. Actual reported job losses for the month were 524,000; ADP had estimated 693,000 jobs had been lost.

Of the last six month’s reports, February’s numbers were the closest. The difference was only 46,000. ADP had reported losses would be 697,000, but they were only 651,000; a positive for the market but not to the 651 thousand who had lost their jobs in February.

The big question is why the market was so positive by a negative number; a number that only a year ago would have been devastating? Why the excitement over a number that is so volatile?

It’s hope! Hope that the ADP number is more like February and not as bad as the miss last November.

The market has steeled itself against bad news and has ironically moved the bar much higher and jumps on numbers that only half a year ago would have been catastrophic to Wall Street. Job losses of this magnitude would have created a seismic 300 plus downward move in the index as early as nine months ago.

Four hundred and ninety-one thousand was not as bad as expected and elicited a huge sigh and a feeling of euphoria on the Street. And on Wall Street, even a hint of euphoria lifts all boats. Even boats that have been sinking for months.

The ADP numbers have not been that far off when they’ve been grossly elevated, but have been horrific when their reported figure is below the Friday released number.

In the two months ADP’s calculations were lower, November and January, they have missed by half a million after the government’s revisions. Conversely, when the numbers ADP reported were higher than the numbers reported in that month, December and February, they have actually been higher than the government’s figures by 56,000. But February has not been revised yet and that could change things.

The good news is, when we include all four months, November through February, the overall difference is only slightly higher than November and January’s half a million. But the fact that February, thus far unadjusted at 651,000, could surprise tomorrow with an adjustment of nearly 100,000 could be worrisome, no matter what the April figures are.

And an upward revision to March could further darken the employment landscape.

Before tomorrow’s Employment Situation numbers, and possible revisions, are released it is important to note that over 3,300,000 jobs have been lost in the last five months. A disastrous number by any standard.

At what point did half a million lost jobs become a positive for Wall Street? At what point did the Street forget that job losses are difficult for those that lose them, but even more devastating in this environment as the ability to find another position diminishes?

At what point did the gamblers forget that every lost job is a reduction in buying power? The loss of a consumer. The potential for increased defaults and foreclosures.

There is no winner in a negative spiraling economy and though the spiral is slowing, it has not reversed.

Yesterday’s euphoria is further evidence of the disconnect between Wall Street and Main Street.

No matter what the number is tomorrow, one thing is clear. It will cause more Pain on Main, but it will also cause pain on the Street.


The ADP monthly employment guesstimate came out yesterday ahead of the actual monthlygovernment employment numbers. The market was exuberant and the Dow futures rose on the positive news. Posted on Worth an on May 7, 2009.