• ADP releases its private-sector labor report after a hiatus, raising expectations for high accuracy.
  • White House comments about cooler job growth lower expectations. 
  • Economists project a modest increase of only 200,000 positions, also lowering the bar for an upside surprise. 

"Some pain" is what Federal Reserve Chair Jerome Powell has promised the American people, a price needed to pay for bringing down inflation – a high bar to stop raising rates and supporting the dollar. And is not even among the reasons to expect ADP's private-sector jobs report to boost the buck. 

Here are three reasons to expect a big bounce from this release, a critical Nonfarm Payrolls preview.

1) Fresh formula means stronger reaction

ADP is the largest payrolls provider in the US, and its estimates of employment changes have always been eyed by market participants. Since the pandemic broke out, however, the correlation between the firm's figures and official private-sector jobs figures have been weak. They occasionally even missed the border trend and came to be seen as a contrarian indicator. 

Earlier this summer, the company did some soul-searching and took a two-month hiatus to revise the ways it calculates labor market changes. The data is now based on the company's own data rather than using models that include macro data coming from outside, such as older official statistics. ADP says its new methods are more transparent, real-time and high-frequency. It held a videoconference to explain the changes and observers were impressed. 

These changes raise expectations for a more accurate report, making it more significant as a hint toward Friday's Nonfarm Payrolls – and as a market mover. It would need to show a loss of jobs to provide any evidence of "pain" – and that is not coming. 

2) White House tip-off

White House spokeswoman Karine Jean-Pierre said on Monday that they expect jobs data to "cool off." It seems like officials are doing some "damage control." Ahead of the June inflation report, the WH noted that data does not reflect falling gasoline prices – and indeed, that figure came above estimates.

Is recent history repeating itself? Even if President Joe Biden did not receive official Nonfarm Payrolls data four days in advance, markets have lowered expectations, even below economists' consensus, taken before Jean-Pierre made her comments.

A lower bar is easier to pass, raising the chances of a dollar-positive surprise. 

3) Already low expectations

The economic calendar indicates an increase of only 200,000 private-sector jobs in August. That compares with a leap of 528,000 overall positions in July. Has hiring tumbled that much? It seems implausible. Slower hiring makes sense, but not halving, especially without a major crisis. August 2022 was not a pivotal month for US nor global history – the Russia-Ukraine war is in a stalemate and covid is almost forgotten. 

It is essential to note that official NFP figures beat estimates in six out of seven months in 2022. There is a good chance that economists are being pessimistic about ADP's data as well.

Source: FXStreet

Final thoughts

The closely watched ADP report comes amid a higher bar for the Fed to stop tightening, repeatedly low expectations from economists, and then downbeat comments from the White House. Such low expectations signal a higher chance of a positive surprise supporting the dollar. 

It is essential to note that ADP's data is released on the last day of the month, and last-minute adjustments by portfolio managers tend to result in higher volatility. Nevertheless, the broader upside dollar trend should continue – with a nudge from the figures. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content

Recommended Content

Editors’ Picks

AUD/USD eyes are on critical daily dynamic support

AUD/USD eyes are on critical daily dynamic support

AUD/USD bears eye a 50% mean reversion in the lower quarter of the 0.6700s. A break of the supporting trendline and subsequent test of  0.6640/50 could be a significant bearish development.


EUR/USD aims for 1.0550 despite upbeat US NFP data, Eurozone Retail Sales eyed

EUR/USD aims for 1.0550 despite upbeat US NFP data, Eurozone Retail Sales eyed

The EUR/USD pair is hovering around a fresh five-month high at 1.0545 in the early Asian session. The major currency pair is expected to extend its rally to near 1.0550 ahead amid an upbeat market mood.


Gold struggles around $1,800 ahead of ISM Services PMI data

Gold struggles around $1,800 ahead of ISM Services PMI data

Gold price is facing immense pressure in conquering the round-level resistance of $1,800.00 in the early Tokyo session. The precious metal is highly expected to display more gains ahead and may extend towards a fresh three-month high at $1,824.63.

Gold News

AVAX: Traders bet should be on Avalanche bulls triggering a 15% rally

AVAX: Traders bet should be on Avalanche bulls triggering a 15% rally

AVAX price has breached an inverse head-and-shoulders setup, hinting at a 13% upswing. AVAX price has broken out of a critical hurdle and pattern, signaling the start of a quick run-up. AVAX price action created an inverse head-and-shoulder setup.

Read more

The Yen, Payrolls, and the Oil price

The Yen, Payrolls, and the Oil price

US stocks wrapped their second straight week of gains, even if stocks slipped on Friday on the back of better-than-expected US Payrolls data.We have been amazed by the resilience in risky assets of late. This year has seen some incredible macro themes.

Read more