We warned earlier this week that the Friday unemployment report may trash the stock market if it comes out too strong. If ADP is a prediction tool, then that is looking to be more likely than not. ADP has now forecast that the private sector added some 215,000 jobs in November in a report that was much stronger than expected. Bloomberg was calling for 185,000 and Dow Jones was calling for only 178,000 payrolls to have been in added during the month.

S&P futures and DJIA futures were trying to make gains this morning but have both dropped handily after the report. S&P futures are down almost five points and DJIA futures were down 29 points.

The reason for the drop may seem counterintuitive, but it is very easy to see right now. This signals that the Federal Reserve can begin its bond purchase tapering sooner rather than later, maybe even this month. The $85 billion is under quantitative easing, and you know that the markets are addicted to stimulus measures.

Bloomberg is calling for the official unemployment rate to drop to 7.2% from 7.3% in October. It also sees 180,000 in new nonfarm payrolls, versus 204,000 from the prior month. Bloomberg’s private sector payrolls estimate is at 173,000, versus 212,000 from the prior month. It seems that the ADP strength will now lift those to look more flat or even growth rather a slight contraction.

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