• US ADP payrolls are foreseen at 438K in March, NFP at 475K.
  • US yield curve is flattening, rings recession alarm amid 50-bps May Fed rate hike bets.
  • Fed Chair Powell believes the labor market is strong enough, recession unlikely.

The US private sector hiring is seen slowing in March after the American companies added more jobs than expected in February. The US ADP private employment report, due on Wednesday at 12.15 GMT, usually provides a good hint at Friday’s full jobs report, so investors will be looking for clues on any potential labor market slowdown.

Pace of jobs creation slows in the US

The Automatic Data Processing (ADP) is forecast to show that US companies have created 438,000 new jobs in March, less than the previous month’s addition of 475,000. In February, business payrolls rose more than the expected 375,000 figure. ADP’s payroll data represent firms employing nearly 26 million workers in the US and its monthly release shows the employment change in the economy.

Source: FXStreet

On Friday, the US Labor Department will release the Nonfarm Payrolls, which is expected to show that the economy has likely added 475,000 new jobs in March after a surprise increase of 678,000 reported in February.

The Automatic Data Processing ADP jobs report is usually considered a proxy to the official Nonfarm Payrolls figures, which will be released on Friday, April 1.

The disparity between the two indicators in recent months, however, makes the ADP result unreliable to gauge the NFP trend and, therefore, could have a limited market impact.

US yield curve flattens, Fed remains hawkish

Heading into the monthly payrolls data, the Russia-Ukraine conflict rages on while the odds of a 50-basis points (bps) Fed rate hike in May almost appears a done deal.

Against this backdrop, the yields on the US Treasuries have rallied to three-year highs, although the increase in the longer-dated yields has failed to match the pace of the advance in the shorter ones. The spread between the two- and 10-year yields narrowed to its lowest since early 2020 on Tuesday.  

The flattening of the yield curve is usually indicative of a likely recession, as investors remain worried that the aggressive Fed’s tightening would damage the US economy over the longer term.

At the March FOMC meeting, Fed Chair Jerome Powell said that the labor market is strong enough that a recession is unlikely. Although Powell remains optimistic about the economy and labor market, he said in his speech last week, “this is a labor market that is out of balance," adding "we need the labor market to be sustainably tight."

To conclude

Markets are pricing in a roughly 60% chance of a 50-bps rate hike at the Fed’s May meeting.

A slowdown in the hiring pace in the world’s biggest economy could likely feed the risks of a recession, especially in the face of soaring inflation. This could pour cold water on the recent Fed’s hawkishness.

The ADP report, however, is unlikely to have any major impact on the US dollar and other related markets. Friday’s NFP release will hold the key to gauging the Fed’s policy action going forward. 

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

EUR/USD jumps towards 1.0600 as USD wilts amid risk rebound

EUR/USD jumps towards 1.0600 as USD wilts amid risk rebound

EUR/USD is trading back above 1.0550, resuming its recovery towards 1.0600 in the European session this Wednesday. The US dollar is falling as the risk rebound extends, despite looming recession fears. ECB Forum, US Durable Goods and Fedspeak eyed. 

EUR/USD News

GBP/USD extends gains above 1.2300 amid weaker USD, Brexit news

GBP/USD extends gains above 1.2300 amid weaker USD, Brexit news

GBP/USD is extending the advance above 1.2300 in European trading, The risk-on mood dents the US dollar's safe-haven appeal while the UK presses on with changes to the Brexit deal despite EU opposition. Key US data awaited. 

GBP/USD News

Gold bulls aim for $1,850 on Russia news, softer USD

Gold bulls aim for $1,850 on Russia news, softer USD

Gold Price extends Friday’s recovery to $1,836 ahead of Monday’s European session. The precious metal’s upside moves could be linked to the softer US dollar, as well as chatters surrounding a ban on gold imports from Russia.

Gold News

What’s next after cryptos meet stiff resistance

What’s next after cryptos meet stiff resistance

Bitcoin price has shown incredible resilience after its massive crash in the second week of June. Since then BTC has produced considerable gains over the past week and the start of a new week brings the promise of even higher returns.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Majors

Cryptocurrencies

Signatures