• US March ADP Employment change expected at +200,000.
  • US ISM Service PMI is estimated to slide marginally to 54.5 in March.
  • Numbers likely to show a tight labor market and service sector expanding.

 Automatic Data Processing will release its National Employment Report for March Wednesday, 12:15 GMT. Later, at 14:00 GMT, the Institute for Supply Management (ISM) will release its Service PMI report, about economic activity in the sector during March.

ADP Private Employment

Private payrolls look poised for a slowdown after an upbeat February report that showed private businesses created 242,000 jobs, above the 119.000 of January. US private sector is forecast to have added 200,000 new jobs in March.

A slowdown in the job market is expected as the impact of tighter monetary policy hits the economy. It won’t necessarily be bad news for the Fed. A tight labor market is not helpful in fighting inflation.

Still, the ADP has not been a good predictor of the Nonfarm Payrolls (NFP). In January, NFP surprised with a 504,000 increase, the highest since July 2022, while the ADP came in at 119,000 the lowest in two years.

The market’s reaction to ADP has been trending lower over the years. The response could be short-lived but is still a relevant macroeconomic report about a crucial market.

ADP

Source: ADP

ISM Service sector PMI

The ISM Service Sector is seen expanding for the third month after unexpectedly falling below the 50 threshold in December. In February, the index came in at 55.1, around the 55.2 registered in January. Market consensus anticipates 54.5 in March, a number in line with the downtrend the index has been showing last year.

The employment index recorded the highest reading since 2021 (54.0) in February and now is expected to pull back a bit to 52. The Price Paid Index is seen falling marginally from 65.6 to 65.2.

ISM S PMI

Source: ISM 

Are bad news still good news for markets?

Both employment and service sector reports are expected to show a slowdown compared to the previous months, but with the labor market still adding jobs and activity in the service sectors expanding. March data comes too soon and won’t reflect the effects of the banking crisis, if there are any. Another weekend passed without bank failures, suggesting that, for the moment, the worst could be behind and market participants will likely turn their attention to macroeconomic data.

Will the job market remain hot? Will the first signs of a real slowdown finally emerge?

In December, the bad news from the ISM Service PMI became good news for equity markets. It is not that clear if that situation could repeat again. Positive news should favor the US Dollar, by boosting expectations that the Federal Reserve (Fed) could keep the tighter monetary policy for longer and at the same time, it will show the economy is growing. However, negative news could also lead to a rally of the US Dollar if it triggers risk aversion across financial markets. For that to happen, numbers would have to be shocking.

The key employment report will be released on Friday, with the official report including Nonfarm Payrolls (expected 240,000), Unemployment Rate (expected 3.6%) and Average Hourly Earnings (expected 0.3%). Employment data surpassing expectations has been usual over the last months, particularly Nonfarm Payrolls, which accumulate an 11-month streak of upside surprises.

All the economic numbers have the potential to influence market expectations on Fed’s monetary policy, which are steady regarding the very short-term but fluctuate sharply considering what could happen from the third quarter onwards. Recession fears and recent banking developments have led markets to price in rate cuts later in 2023. The economic outlook is uncertain and even the Fed does not know what it will do. The forward guidance is vague. This week’s economic data could help to shed some light but it won’t bring clarity.

 

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.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD clings to modest gains above 1.0650 ahead of US data

EUR/USD clings to modest gains above 1.0650 ahead of US data

EUR/USD trades modestly higher on the day above 1.0650 in the early American session on Tuesday. The upbeat PMI reports from the Eurozone and Germany support the Euro as market focus shift to US PMI data.

EUR/USD News

GBP/USD extends rebound, tests 1.2400

GBP/USD extends rebound, tests 1.2400

GBP/USD preserves its recovery momentum and trades near 1.2400 in the second half of the day on Tuesday. The data from the UK showed that the private sector continued to grow at an accelerating pace in April, helping Pound Sterling gather strength against its rivals.

GBP/USD News

Gold flirts with $2,300 amid receding safe-haven demand

Gold flirts with $2,300 amid receding safe-haven demand

Gold (XAU/USD) remains under heavy selling pressure for the second straight day on Tuesday and languishes near its lowest level in over two weeks, around the $2,300 mark in the European session. Eyes on US PMI data. 

Gold News

Here’s why Ondo price hit new ATH amid bearish market outlook Premium

Here’s why Ondo price hit new ATH amid bearish market outlook

Ondo price shows no signs of slowing down after setting up an all-time high (ATH) at $1.05 on March 31. This development is likely to be followed by a correction and ATH but not necessarily in that order.

Read more

US S&P Global PMIs Preview: Economic expansion set to keep momentum in April

US S&P Global PMIs Preview: Economic expansion set to keep momentum in April

S&P Global Manufacturing PMI and Services PMI are both expected to come in at 52 in April’s flash estimate, highlighting an ongoing expansion in the private sector’s economic activity.

Read more

Majors

Cryptocurrencies

Signatures