Summary: ADP payrolls up 103,000 in November, less than consensus expectations; October number revised down by 7,000; ADP: boost behind us, more moderate hiring and wage growth expected in 2024; short-term US Treasury yields up modestly, longer-term yields down; expectations of Fed rate cuts in 2024 soften; positions up in small, medium, large businesses; all gains in services sector, led by trade, transportation, utilities sector.
The ADP National Employment Report is a monthly report which provides an estimate of US non-farm jobs in the private sector. Publishing of the report began in 2006 and its figures exhibited a high correlation with official non-farm payroll figures even though large differences arose in individual months. A major revamp of the ADP report took place in mid-2022, materially altering the data. However, month-on-month changes in the non-farm payroll data and ADP series are still highly correlated.
The latest ADP report indicated private sector job numbers increased by 103,000 in November, less than the 120,000 increase which had been generally expected. October’s rise was revised down by 7,000 to 106,000.
“Restaurants and hotels were the biggest job creators during the post-pandemic recovery,” said ADP Chief Economist Nela Richardson. “But that boost is behind us, and the return to trend in leisure and hospitality suggests the economy as a whole will see more moderate hiring and wage growth in 2024.”
Short-term US Treasury yields rose modestly on the day while longer-term yields fell. By the close of business, the 2-year had added 2bps to 4.60% while 10-year and 30-year yields both finished 6bps lower at 4.12% and 4.23% respectively.
In terms of US Fed policy, expectations of a lower federal funds rate in the next 12 months softened. At the close of business, contracts implied the effective federal funds rate would average 5.33% in December, in line with the current spot rate, 5.33% in January and 5.245% in March. November 2024 contracts implied 4.29%, 104bps less than the current rate.
Employment numbers in net terms increased in small, medium and large enterprises. Firms with less than 50 employees gained a net 6,000 positions, mid-sized firms (50-499 employees) added 68,000 positions while large businesses (500 or more employees) accounted for 33,000 more positions.
Employment at service providers accounted all of the total net increase, adding 117,000 positions. The “Trade, transportation and utilities” sector was the largest single source of gains, with 55,000 more positions, while the “Leisure and hospitality” sector was the month’s largest single source of losses, with 7,000 fewer positions. Total jobs among goods producers decreased by a net 14,000 positions.
Prior to the ADP report, the consensus estimate of the change in November’s official non-farm employment figure was 200,000. The non-farm payroll report will be released by the Bureau of Labor Statistics this coming Friday night (AEST), 8 December.