Summary: ADP payroll numbers up in August; again, much less than expected; July numbers revised up moderately; size of gain suggests “downside risk” to upcoming non-farm payrolls (NFP) report; figures up across firms of all sizes; services sector accounts for 90% of gains; report cited as “not accurate reflection” of NFP for past few months.
The ADP National Employment Report is a monthly report which provides an estimate of US non-farm employment in the private sector. Since the report began to be published in 2006, its employment figures have exhibited a high correlation with official non-farm payroll figures, although a large difference can arise in any individual month.
The ADP August report indicated private sector employment increased by 0.428 million, far less than the 0.9 million which had been generally expected. July’s increase was revised from 167,000 to 212,000.
NAB Head of FX Strategy within its FICC division Ray Attrill said the report suggests “downside risk to Friday’s non-farm payrolls…”
Short-term US Treasury yields rose a little while longer-term yields fell. By the close of business, the 2-year Treasury bond yield had gained 2bps to 0.14%, the 10-year yield had shed 3bps to 0.65% and the 30-year yield finished 4bps lower at 1.38%.
In terms of US Fed policy, expectations of any change in the federal funds rate over the next 12 months retained a slight easing bias. OIS contracts for September implied an effective federal funds rate of 0.073%, about 2bps below the current spot rate.
Employment numbers in net terms were up across a range of differently sized businesses, especially larger ones. Firms with less than 50 employees filled a net 52,000 positions, mid-sized firms (50-499 employees) gained 79,000 positions while large businesses (500 or more employees) accounted for 289,000 additional employees.