Breaking: US ADP private sector employment increases 184,000 in March vs. 148,000 expected


Private sector employment in the US rose by 184,000 in March, the Automatic Data Processing (ADP) reported on Wednesday. This reading followed the 155,000 increase (revised from 140,000) recorded in February and came in above the market expectation of 148,000.

"For job-stayers, year-over-year pay gains were flat at 5.1 percent after months of steady deceleration," the publication read. "At the same time, gains for job-changers rose dramatically to 10 percent, the second straight increase."

Assessing the report's details, “March was surprising not just for the pay gains, but the sectors that recorded them," said Nela Richardson, chief economist, ADP, and continued:

"The three biggest increases for job-changers were in construction, financial services, and manufacturing. Inflation has been cooling, but our data shows pay is heating up in both goods and services.”

Market reaction to US ADP employment data

This data doesn't seem to be impacting the US Dollar's valuation in a noticeable way. At the time of press, the US Dollar Index was down 0.05% on the day at 104.70.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Euro.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.15% -0.02% -0.01% -0.08% 0.17% -0.03% 0.00%
EUR 0.15%   0.14% 0.15% 0.08% 0.32% 0.12% 0.15%
GBP 0.03% -0.14%   0.01% -0.06% 0.17% -0.02% 0.02%
CAD 0.01% -0.15% -0.01%   -0.07% 0.17% -0.02% 0.01%
AUD 0.07% -0.10% 0.03% 0.09%   0.25% 0.05% 0.05%
JPY -0.17% -0.32% -0.20% -0.17% -0.20%   -0.20% -0.17%
NZD 0.04% -0.12% 0.02% 0.03% -0.05% 0.21%   0.04%
CHF -0.02% -0.16% -0.02% -0.02% -0.07% 0.16% -0.04%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

 


This section was published as a preview of the US ADP employment data at 07:30 GMT.

  • The ADP survey is expected to show the private sector added 148K new positions in March.
  • The Federal Reserve has made it clear that policymakers are in no rush to cut interest rates. 
  • The US Dollar trades with a firmer tone in a risk-averse environment.   

The United States (US) Automatic Data Processing (ADP) Research Institute will release the private employment data for March on Wednesday. The survey provides information about job creation in the private sector and it is usually released two days before the official jobs report of the Bureau of Labor Statistics (BLS), which features Nonfarm Payrolls (NFP) data.

According to market analysts, the ADP survey is expected to show 148K new positions were added in March, slightly above the 140K reported in February. However, previous readings are always subject to revisions, and a solid ADP survey hardly means an in-line NFP report, as the correlation between the two reports has been sporadic, to say the least.

Still, the relevance of the ADP survey is enhanced by the fact the US releases multiple employment-related data in the days previous to the NFP publication. All combined help market participants find clues on what the Federal Reserve (Fed) may do next with monetary policy. 

Fed Chairman Jerome Powell has multiple times explained a tight labor market weighs against the case of lower interest rates, as it risks lifting inflationary pressures through wage increases. As of lately, American policymakers are less concerned about the employment situation, although they seem comfortable where they are. 

Powell participated in a discussion at the Macroeconomics and Monetary Policy Conference in San Francisco on Friday. He said the economy is strong and that policymakers are not in a hurry to cut rates. He repeated that they want to be more confident before doing so. According to the CME FedWatch Tool, the odds for a June rate cut are roughly 56%, following Powell’s comments and data indicating that the core Personal Consumption Expenditures (PCE) inflation remained steady at 2.8% YoY in February.

The ADP survey also offers pay data. In February, the report showed that “pay gains for job-changers accelerated for the first time in more than a year, rising to 7.6% from 7.2%.”  

Nela Richardson, ADP Chief Economist, noted: “Job gains remain solid. Pay gains are trending lower but are still above inflation. In short, the labor market is dynamic but doesn't tip the scales in terms of a Fed rate decision this year.”

With that in mind, another solid report will likely further undermine the odds of a rate cut in June and put financial markets in risk-off mode. 

When will the ADP Jobs Survey will be released and how could it affect DXY?

The ADP survey on job creation will be out on Wednesday and is expected to report the private sector added 148K new positions in March. If the headline reading widely surpasses the estimate, it could be understood as a stubbornly strong labor market. Combined with higher wages, the news will likely boost demand for the USD. The opposite scenario, weak job creation alongside easing wages, should push the Greenback into negative ground amid a better sentiment. 

From a technical perspective, Valeria Bednarik, Chief Analyst at FXStreet, notes: “The Dollar Index (DXY) flirts with 105.00 ahead of the announcement, after hitting 105.10 on Tuesday, a fresh 2024 high. The bullish momentum, however, is missing in the daily chart, despite the overall picture favors an upward continuation. The DXY develops above its moving averages, although the 100 and 200 Simple Moving Averages (SMAs) lack directional strength. Only the 20 SMA seems to be giving signs of life, grinding marginally higher and poised to cross above the 100 SMA. Meanwhile, technical indicators remain within positive levels, although without clear directional strength.”

Bednarik adds: “Beyond the 105.20 region, the DXY has little to deal with until 105.50. A daily close above the latter should confirm the bullish case and pave the way for a test of the 106.00-106.10 price zone. On the other hand, immediate support is located at 104.70, followed by 104.25.” 

 

Nonfarm Payrolls FAQs

Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.

The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.

Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.

Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.

Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.

 

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