- ADP’s Job Change report is expected to show a modest improvement in the number of private jobs created in September.
- The United States will publish the Nonfarm Payrolls report on Friday.
- The US Dollar consolidates post-Fed losses and is at risk of falling further.
The Automatic Data Processing (ADP) Research Institute will publish its monthly report on private sector job creation for September on Wednesday. The so-called ADP Job Change report is expected to show that the United States (US) added 120,000 new jobs in September after creating 99,000 jobs in August.
The data is typically released two days before the official Nonfarm Payrolls (NFP) report for the same month and is generally considered a leading indicator of the Bureau of Labor Statistics (BLS) employment report, despite a dubious correlation between the two. indicators.
ADP Employment Report: Employment and the Federal Reserve
US employment data has been in the eye of the storm for more than a year due to its impact on the latest monetary policy decisions from the Federal Reserve (Fed). The Fed’s dual mandate of maximum employment and price stability has been under siege in the wake of the pandemic, with the central bank opting to tighten monetary policy to balance things out.
The main issue was inflation, as price pressures soared throughout 2022. The Fed raised rates to record levels and kept them there amid risks that a tight labor market would further fuel pressures. about prices. However, indicators have improved in recent months, and the Fed finally decided to cut interest rates. US policymakers cut the benchmark rate by 50 basis points (bps) when they met in September, anticipating additional cuts down the road.
That said, market participants are now wondering whether the central bank will make a discretionary 25 bps cut when it meets in November or proceed again with a 50 bps cut. Ahead of the data release, the odds of a 25 bps cut stand at 66%, according to the CME FedWatch tool.
Meanwhile, Fed officials have shifted their focus from inflation to employment. With price pressures easing, maintaining a “healthy” labor market is now your main objective.
With this in mind, a stronger-than-anticipated ADP report will likely reduce the odds of another aggressive interest rate cut in November, providing near-term support to the US Dollar. Conversely, a disappointing reading could increase speculative interest for another 50 bps interest rate cut, resulting in a weaker USD. Finally, it is worth remembering that the report could have a short-lived impact, as market players will likely wait until the NFP release scheduled for Friday.
When will the ADP report be released and how could it affect the US Dollar Index?
ADP will release the US Employment Change report on Wednesday and is expected to show that the private sector added 120,000 new jobs in September.
Ahead of the release, the US Dollar Index (DXY) consolidates below the 101.00 level after recording a new 2024 low of 100.16 in late September.
From a technical perspective, Valeria Bednarik, Chief Analyst at FXStreet, says: “The DXY has remained under pressure since the Fed’s monetary policy announcement in mid-September, and technical readings on the daily chart suggest its upside potential remains being very limited. A bearish 20 SMA provides short-term resistance around the aforementioned threshold, while a bearish 100 SMA gains downward momentum well above the shorter one, and after crossing below a SMA of 200 flat.”
Bednarik adds: “Meanwhile, technical indicators remain within negative levels, lacking directional momentum. Overall, risk is tilted to the downside. Resistance beyond the 101.00 threshold lies at 101.47, followed by the daily low of 102.17 recorded on August 5. Supports, on the other hand, can be found at 100.41 and the year-to-date low of 100.16. A break below the latter could herald a steeper decline towards the 99.00 figure.
economic indicator
ADP Employment Report
The employment data is prepared by Automatic Data Processing Inc. in collaboration with Moody’s Analytics. It is an estimate of the change in the number of people employed in the private, nonfarm sector in the United States and is published monthly. A positive number implies that the private sector recorded an increase in worker payrolls, while a negative number means a reduction. Figures above expectations are usually positive for the dollar, while those below expectations are negative.
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Wed Oct 02, 2024 12:15
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ADP Research Institute
Traders often consider employment figures from ADP, the largest U.S. payroll provider, to be the harbinger of the Bureau of Labor Statistics’ release on Nonfarm Payrolls (usually released two days later), because of the correlation between the two. The overlap of both series is quite high, but in individual months, the discrepancy can be substantial. Another reason currency traders follow this report is the same as with the NFP: strong and persistent growth in employment numbers increases inflationary pressures and, with them, the likelihood that the Fed will raise interest rates. . Actual numbers that beat consensus tend to be bullish for the USD.
Employment FAQs
Labor market conditions are a key element in assessing the health of an economy and, therefore, a key factor in the valuation of currencies. A high level of employment, or a low level of unemployment, has positive implications for consumer spending and therefore economic growth, boosting the value of the local currency. On the other hand, a very tight labor market – a situation in which there is a shortage of workers to fill vacant positions – can also have implications on inflation levels and, therefore, on monetary policy, since a supply of labor Low labor and high demand lead to higher wages.
The pace at which wages grow in an economy is key for policymakers. High wage growth means that households have more money to spend, which often translates into higher prices for consumer goods. Unlike more volatile sources of inflation, such as energy prices, wage growth is considered a key component of underlying and persistent inflation, as wage increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding their monetary policy.
The weight each central bank assigns to labor market conditions depends on its objectives. Some central banks have mandates explicitly related to the labor market beyond controlling inflation levels. The United States Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the only mandate of the European Central Bank (ECB) is to keep inflation under control. Even so, and despite the mandates they have, labor market conditions are an important factor for authorities given their importance as an indicator of the health of the economy and their direct relationship with inflation.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
