The US Labor Market Shows Strength, but Not Nearly as Much as ADP’s Report Suggested
Key Takeaways
- Friday’s Nonfarm Payrolls report from the Bureau of Labor Statistics showed that the US economy added 209,000 jobs in June, missing the consensus 240,000 forecast
- Unemployment dropped slightly, on par with expectations, from 3.7% to 3.6% in June; while annual wage growth printed 4.4%, beating its 4.2% estimate.
- In stark contrast to NFP, ADP’s jobs report released this Thursday showed private businesses in the US added 497,000 jobs — more than double the 228,000 expectation
This Friday, the Bureau of Labor Statistics’ nonfarm payrolls report showed 209,000 new jobs in June, missing analyst expectations of 240,000. This was a sharp drop from the number of jobs added in May, suggesting that employment momentum may be slowing. ADP’s employment report this Thursday sent a very different message, showing the private sector adding a whopping 497,000 jobs.
A resilient labor market with growing wages suggests that inflationary pressures may still be looming. Q.ai’s Inflation Protection Kit uses cutting-edge AI to scan through swaths of data, selecting the best value inflation-resistant assets such as TIPS, commodities, and precious metals, helping you safely invest your capital in these uncertain times.
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US labor market sends mixed signals
This Thursday’s tremendously strong ADP jobs report had many expecting the Labor Department’s NFP report this Friday to echo the labor market’s immense strength — however, this wasn’t the case, and the report instead was a mixed bag.
In June, BLS data showed nonfarm payrolls were up by 209,000, signaling some softening in the labor market. However, the unemployment rate and annual wage growth told a different story: unemployment ticked lower as per market expectations, continuing to print historically low levels.
Annual wage growth also continued to indicate renewed tightness in the labor market, beating its 4.2% Wall Street expectations and coming in at 4.4%. Similarly, average hourly wages on US nonfarm payrolls increased 0.4%, reaching $33.58 this June.
How did markets react to the labor data?
The release of ADP’s report this Thursday caused major US indexes to slip slightly, with markets speculating that the immense strength in the labor market meant the Fed would be more likely to enact two more 25 basis point interest rate hikes.
After the release of Friday’s nonfarm payroll data, however, the markets revised its expectation for a second 25 basis point hike slightly lower, as shown by the CME FedWatch Tool. Markets placed a 40% likelihood of a second hike at the Fed’s November meeting prior to NFP data — this figure dropped down to 33% following the report.
Major US equity indexes reflected this uncertainty. Thursday’s ADP report caused markets to slip, while Friday’s report saw markets grinding higher on the slightly lower expectation of a second rate hike this year.
The bottom line
The nonfarm payrolls report for June may suggest a softening job market; however, the strong unemployment and wage growth figures don’t fully support this view. As a result, it remains unclear at this stage if inflationary pressures are subsiding — we’ll simply have to wait for more data to paint a clearer picture.
It’s challenging to get a clear read on whether we’ve seen the worst of inflation, or when the Fed will finally pivot. Q.ai’s Inflation Protection Kit uses AI-powered strategies to filter out the noise, pinpointing the strongest inflation-resistant assets such as TIPS, precious metals, and commodities — helping you safely invest your capital in these uncertain market conditions.
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