US Employment Softening After Inflation, As ADP Numbers Dip
The USD has turned bearish in the last two weeks and it resumed the decline earlier today, following the release of the ADP figures, which show that employment has only increased by 145K jobs, which is lower than the 200K jobs predicted by economists and the previous month’s 261,000 new jobs. This report follows a similar trend shown in the JOLTS job openings numbers released yesterday, which also indicated a decrease in job growth.
The market has responded by pricing a 55% chance that the FOMC (Federal Open Market Committee) will not hike rates in May, up by 5 percentage points from earlier this week. As a result, the USD has declined across the board, albeit to a lesser extent due to risk aversion as this decline increases odds for a recession. Indices have also fallen by 10-20 points following the release of the ADP data.
Many believe that the US economy might take a quick dive, and the FED may struggle to keep up with the curve. With pandemic savings set to decrease further in the coming months, there could be a sharp drop in consumer spending. However, if the FED navigates carefully, it may be able to engineer a soft landing. The FED funds futures curve is predicting that rates will reach 4.06% by the end of the year. We already went short on USD/JPY, as risk sentiment continues to take a hit.
- Prior month revised to 261K from 242K
- March ADP national employment plus 145K versus 200 K
- Small (less than 50 employees) +101K
- Medium firms (500 – 499) +33K
- Large (greater than 499 employees) +10K
- Job stayers 6.9% versus 7.2%
- Job changers 14.2% versus 14.3% last month
ADP says that employee earning gains fell faster in March. They also comment that:
- Our March payroll data is one of several signals that the economy is slowing
- Employers are point back from a year of strong hiring and pay growth, after a three-month plateau, is inching down.
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