September’s ADP Employment Report Research Notes

by Jim Baird on October 6, 2010

Today’s ADP report provided further evidence that the summer slowdown in the economy is still having a tangible negative effect on the jobs market.

Regardless how you measure it, the current pace of job creation will do little to bring down the unemployment rate or inspire confidence in consumers or jobseekers. 

The weak employment market continues to be an underlying threat to the recovery, as the pace of job creation remains subpar and the psychological impact on consumers is evident.

Personal income levels in August were buoyed by the extension of unemployment benefits which had otherwise expired.  Take that away, and inflation-adjusted personal income growth has been virtually non-existent in the past three months.      

The discouragement is clear in consumer confidence, which recently reached its lowest point in over six months.  Pent up demand seems likely to remain squelched as consumers continue to take a wait and see approach. 

The trifecta of high joblessness, discouraged consumers, and slowing economic growth could be a perilous combination.  Each of these feed off the other, creating the potential of a negative feedback loop that can be difficult to break.

While we continue to believe a double-dip is not the most likely scenario, the “unusual uncertainty” clearly has blurred the path to recovery.

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