Summary: ADP payroll numbers increase in January; more than consensus figure; December fall revised up by 45,000; result leads to “reasonably prospect” of January NFP rise on Friday; figures up across firms of all sizes; services sector accounts for 90% of gains.
The ADP National Employment Report is a monthly report which provides an estimate of US non-farm employment in the private sector. Since publishing of the report began 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 January report indicated private sector employment increased by 174,000, more than the 70,000 which had been generally expected. December’s fall was revised up by 45,000 to -78,000.
Longer-term US Treasury yields moved noticeably higher on the day. By the close of business, the 10-year Treasury bond yield had gained 4bps to 1.14% and the 30-year yield had increased by 6bps to 1.93%. The 2-year yield finished unchanged at 0.11%.
In terms of US Fed policy, expectations of any change in the federal funds rate over the next 12 months remained soft. Federal funds futures contracts for February 2022 implied an effective federal funds rate of 0.075%, just under the current spot rate.
NAB Head of FX Strategy within its FICC division Ray Attrill said the higher-than-expected result holds “out a reasonably prospect of a rise in employment come Friday’s non-farm payroll numbers.”
Employment numbers in net terms increased across businesses of all sizes, with medium-sized firms the main drivers of the month’s gain. Firms with less than 50 employees filled a net 51,000 positions, mid-sized firms (50-499 employees) gained 84,000 positions while large businesses (500 or more employees) accounted for 39,000 additional employees.