ADP employment, ISM manufacturing: What to know in markets Wednesday

Heidi Chung

Investors will get a pulse on the U.S. private sector Wednesday when ADP releases its monthly employment report. Economists polled by Bloomberg expect 150,000 jobs losses in the private sector in March, following 183,000 job additions in February.

“Due to methodological differences compared to the BLS’ [Bureau of Labor Statistics] employment report, we expect ADP’s March report to pick up more of the layoff activity that occurred during the second half of the month,” Nomura wrote in a note March 27. “The BLS payroll reference week is the week containing the 12th of the month, but ADP only observes pay date and period, sometimes requiring interpolation to match the BLS reference period. This will likely mean, on net, a weaker ADP employment report relative to the BLS, as the ADP report will inadvertently capture more activity in the week ending 21 March, which, based on initial claims data, was considerably weaker for the labor market.”

ADP’s private sector employment report comes ahead of Friday’s BLS report, and it comes amid heightened concerns about a deteriorating U.S. economy due to the deadly coronavirus pandemic. Though the ADP report is not always a reliable indicator of what the BLS report will illustrate, it could still provide a insight into the current status of employment in the U.S.

Workers assemble cars at the newly renovated Ford's Assembly Plant in Chicago, June 24, 2019. (Photo by JIM YOUNG / AFP) (Photo credit should read JIM YOUNG/AFP via Getty Images)

The Institute for Supply Management’s (ISM) manufacturing data released Wednesday will help investors gauge the blow to the U.S. economy due to COVID-19 outbreak.

Factory closures and massive supply chain disruptions are likely to have caused a sharp slowdown in manufacturing during the month of March. “[We] anticipate that ISM will meaningfully underperform other manufacturing surveys,” Credit Suisse said in a note March 26. “Going forward, ISM should drop further into recessionary territory as factory shutdowns persist and consumer and investment demand slows sharply. We expect a cumulative decline of over 15% in US industrial production from March through May. Some parts of production will see a sharp pickup when contagion concerns ease, but the recovery will be incomplete and we expect long-lasting weakness in the manufacturing and energy sectors.”

Economists expect an ISM manufacturing reading of 45.0 in March, down from 50.1 in February. A reading above 50 indicates expansion and a reading below 50 signals contraction in the manufacturing sector. The manufacturing sector represents about 11% of the U.S. economy.

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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