Superficial relative improvement in layoffs and ADP’s September data risk upward revisions to August nonfarm payrolls, which will be reported Friday. We caution that questionable seasonal adjustments have exaggerated the strength in ADP’s headline. Moreover, cooling in job switcher wages versus job stayers fits with labor loosening that doesn’t end here. The accelerating bankruptcy cycle should maintain the upside risks to the unemployment rate. 
TAKEAWAYS
While ADP’s 143,000 headline surprised to the upside, the NSA tally fell by -260,000, the worst September on record; still, the headline beat, along with the JOLTS hires-separations spread rising to 320,000 vs. July’s 102,000, flag potential for upward August NFP revisions
Per ADP, the spread between YoY pay gains for job changers and job stayers fell to a new cycle low of 1.9 pps in September; the same spread tracked by the Atlanta Fed inverted in August to -0.1 pps on a 3MA basis, which in past cycles has foretold higher unemployment
The NACM’s aggregate Mfg/Services bankruptcy metric has been negative on a z-score basis for eight quarters, matching the duration seen in the GFC; with the bankruptcy cycle yet to run its course, layoffs will continue to flow through to higher continuing claims
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