Market Talk

ADP’s big upside surprise in its December private payrolls gauge — 297,000 vs expectations for closer to 100,000 — came mostly in services-sector payrolls, which contributed 270,000 of the 297,000. If that number is indeed valid, we thought it’d be logical to assume a nice pop in the employment component in ISM’s December non-manufacturing index, often referred to as the “services” index.

Didn’t happen.

The ISM employment component fell to 50.5 from 52.7, tantalizingly close to the demarcation point between job expansion and contraction, and not exactly strong validation for the ADP gauge. ISM downplays the employment decline relative to ADP’s reading, noting non-manufacturing covers industries outside of “services,” such as construction, as well as public sector employment.

ISM said industries seeing Dec job reductions included: construction; agriculture, forestry, fishing & hunting; arts, entertainment & recreation; accommodation & food services; health care & social assistance; public administration; and wholesale trade.

So the ISM data cast some level of doubt on that beefy ADP number, and according to Newswires’ Kathleen Madigan, even the firm that helps compile the ADP report — Macroeconomic Advisers — has some reservations about its correlation to the actual government numbers due Friday. The firm notes on its blog a few reasons “to be suspicious of this figure,” including seasonal adjustment problems.

“We accept that the (national employment report) is very likely overstating growth of private payrolls” due to the seasonal adjustment issues, the blog says, but “we would not be surprised to see a portion of the unexpected weakness in BLS employment in November reversed and manifested as outsized strength in December.”

- Spiking interest rates shouldn’t be dismissed as an “irrelevant development,” especially if they continue rising at their recent pace, James Hamilton says.

- Short sellers deserve some vindication, especially for uncovering dishonest management, Barry Ritholtz says.

- Health-care reform sends out accounting ripples, FT Alphaville notes, as AT&T (T) as well as 3M (MMM), Deere (DE), Catepillar (CAT) and AK Steel (AKS) are all anticipating charges.

- Obama’s health-care victory has “breathed new life into his administration” and energized Democrats. His next “big thing” should be focusing on jobs, former labor secretary Robert Reich says.

- “Relative to every previous recession since 1948, the current hole in lost jobs is unusually deep,” James Picerno says. “In addition, the trend in job destruction this time suggests that repairing the damage will take longer compared with the past 60 years of economic recovery.”

- Trading in the weeks before and after Easter may not be as quiet as many think, Bespoke notes.

- “Against all the odds, a glimmer of hope for real financial reform begins to shine through,” former IMF chief economist Simon Johnson says.

-High income disparity leads to low savings rates, Yves Smith writes.

- “The problem is regulating shadow banking — non-depository banking,” Paul Krugman says. “So right from the beginning we have the problem of deciding what is a bank, and what liabilities need deposit-type guarantees.”

- “The Fed will take comfort in the inflation statistics even though the energy component in particular will reverse higher in March,” Miller Tabak’s Peter Boockvar says. “But income growth running higher by 2% y/o/y with spending up 3.4% y/o/y can only last for so long with access to credit not what it used to be.”

- Don’t blame the Fed for the jump in mortgage rates, Paul writes in today’s Ahead of the Tape column.