Have you ever wondered why the stock market moves more on some days and does nothing on others?
There’s a reason for the big moves.
News gets released and it takes investors by surprise.
Sometimes the news comes from reports that get released every month like the ADP Jobs Report.
What Is The ADP Jobs Report?
That is a great question. But before I can answer that, I need to explain ADP.
ADP is a publicly traded company on the NASDAQ and it handles human resource management for companies that don’t want to handle it in house.
For example, they handle payroll for the company I work for.
This gives them inside information on hiring, firing and job creation.
So they created a jobs report commonly called the ADP Jobs Report to let everyone know how the economy is doing.
The ADP Jobs Report shows you how many jobs were created in the last month.
It has become a report that investors look at heavily to gauge the health and direction of the overall economy.
Why Does The ADP Jobs Report Impact The Stock Market?
You need to keep in mind that the stock market is an expectations market in the short-term.
In the short-term, it’s like gambling on football in Las Vegas.
Las Vegas sets an expectation that my Georgia Bulldogs will beat a cupcake team by 21 points.
When they inevitably squeak by and beat the cupcake by 3, the football voters are disappointed in Georgia and they will fall in the rankings.
This is like the stock market in the short-term.
There is an expectation set by investors for the ADP Jobs Report every month.
If the actual number of new jobs exceeds the expected number of new jobs, the stock market will go up.
And by stock market, I mean the indices like the S&P 500, NASDAQ 100 and Dow Jones Industrial Average.
If the actual number of new jobs doesn’t exceed the expected number of new jobs, the stock market will go down.
But this impact won’t last long.
It depends on the size of the difference and what other news is coming out.
What Is Example Of The ADP Jobs Report Impact?
Let’s look at an example.
The ADP Jobs Report came out on May 3, 2017.
It comes out every month about that time.
Investors expected 170,000 new jobs created in the month of April.
177,000 jobs were created.
So that’s good right?
It is but that difference isn’t enough to make an impact on the stock market.
So you have to look back at last month’s report.
263,000 jobs were created in March of 2017 and that number was revised down to 255,000 jobs.
So you have more negative news than positive news.
The number of jobs created in April were a lot less than in March and March’s numbers were revised down.
So how did this impact the stock market?
At one point in the morning, the Dow Jones Industrial Average fell 70.73 points.
The S&P 500 Index fell 10.82 points and the NASDAQ Composite fell 42.09 points.
That was the investor knee-jerk reaction.
The indices fought back and regained most of those losses.
Where Can I Find the ADP Jobs Report Results?
I couldn’t get through this article without mentioning Econoday.
I get all my report results there.
It’s free for the basic reports calendar and that’s all you will probably need.
It’s a great tool.
How Can The ADP Jobs Report Make You a Better Investor?
This is where it all comes together.
This knowledge will allow you to make more informed and educated investment decisions.
It will also prevent a knee-jerk reaction like selling your investments on bad report results.
Just know the big moves up or down are a temporary reaction to this report.
You’ll have the confidence to stick with your investment strategy.
You’ll be glad that you did.
Knowing about and understanding these economic reports will improved your investment knowledge.
Developing your knowledge is critical to becoming a good investor.
Knowledge gives you confidence and confidence prevents you from making emotional decisions.
Investing with emotions will almost always lead to you losing money.
So avoid emotional investment decisions and pay attention to the reports.
Have you ever made an investment decision when your emotions were running high?
If so, how did it turn out?
Click the link to return to Finance Footing home.