As ADP has shown; an increase of 330K below both the revised 680K in June and the expected 690K; which shows that the labor market is struggling in the context of the lowest job gain since February. In other words, despite the strong recovery in the economy, it reflects the situation in which companies start to slow down in filling job positions in the context of catching up with the increasing activity. This poses a risk, especially in terms of its potential to spread to the base, which we underlined. After the segment that is easy to return to work, the sub-segment and local companies that will have more difficulties are the ones that may suffer the most. It will take more time for such businesses to fill open positions compared to large-scale companies.
If we look at the sub-items; The increase in service providers looks positive. In July, the service sector added 318K new jobs, while the increase in leisure and accommodation businesses was 139K. Goods producers, on the other hand, increased by 12K in this period. The increase in construction is quite weak, only at the level of 1K. It would be correct to comment that construction companies could not keep up with the increasing demand for housing, but the priority of the housing sector is destocking at the moment.
Concerns over the delta variant and the range of uncertainty also pose downside risk to firms' investment decisions. It is worth emphasizing again that the extent to which countries are affected by this will very closely depend on their progress in vaccination. Covid-19 concerns created by viral variants should still be viewed as a downside. The state of production may be affected very closely by the difficulties in the supply of raw materials. Supply bottlenecks will slow momentum if production cannot keep up with demand.
In the NFP to be announced on Friday, 870K is expected in the headline, 709K in the private sector and 5.7% in the unemployment rate. Since the correlation of ADP and NFP is unreliable, it would not be correct to make inferences about the data from here. Of course, the importance of future data is high in that it links the Fed's policy somewhat with employment progress.
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