It’s quite a storm out there… and I don’t mean the weather. In fact, the economy has moved past the adverse effects of the severe winter weather in the first quarter, as the second quarter rebound in the US GDP was enough to make most investors jump for joy. While there were a number of strong components in the GDP report, the rebound was primarily led by inventory growth. The “advance” estimate for the second quarter was at a healthy 4.0% annualized, following an upwardly revised decline of 2.1% in the first quarter (previously down 2.9%) and well above the estimate of 3.1%. However, the rally was short-lived due to a variety of factors, the top one being investor worries over what this GDP data will mean for interest rates; the Federal Reserve will comment on GDP later this afternoon. In addition, a report from Reuters noted that Russian rebels were retaliating against the newly imposed economic sanctions. Rebels are reportedly still fighting near the crash site of the Malaysian Airlines plane in Ukraine, plus Russia has banned imports from Poland and is considering increasing the ban to cover the entire European Union. Nevertheless, as investors wait for the Federal Reserve’s comments and fret over Russia, the Employment Report from ADP showed a dip in job creation which may not bode well for the Bureau of Labor Statistics jobs report which will be released on Friday.

The ADP national employment report, created in conjunction with Moody’s, is computed from a subset of ADP records that represent approximately 400,000 U.S. business clients and approximately 23 million U.S. employees working in all private industrial sectors. For the month of July, the ADP noted a change in employment of 218K which was below the consensus estimate of 235K and well below the unrevised 281K jobs created in June.

The goods-producing sector added 16,000 jobs in July while the service-sector added 202,000 jobs. Industrial-related jobs continue to show light activity relative to service and business-related jobs. The construction industry added 12,000 jobs in July, which is less than half of last month's gain. Meanwhile, manufacturing added 3,000 jobs in July, less than a third the number of jobs added in June. On the other hand, the report indicated that professional/business services contributed 61,000 jobs in July, but was down from 79,000 in June. Expansion in trade/transportation/utilities grew by 52,000, which was just slightly lower than June's 56,000. The 9,000 new jobs added in financial activities were down 25% from the previous month. Despite the decline from June, we note that the jobs number for July mark the fourth month in a row where the employment gains came in above 200,000 – which is slightly encouraging. Analysts at Moody’s noted that overall, these numbers are encouraging, and if growth continues at this pace, we should see a quick and significant decline in the unemployment rate. Moody’s economists also note that layoffs are still receding and hiring and job openings are picking up, and if the current trends continue, the economy should return to full employment (~5%) by late 2016.