Summary: ADP payrolls up by 692K in June; more than consensus figure; May increase revised down by 92K; “another sign” activity, employment in service sector “rebounding quickly”; led again by leisure/hospitality sector; figures up equally across firms of all sizes; 90% of gain in services sector.
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 latest ADP report indicated private sector employment increased by 692,000 in June, more than the 530,000 which had been generally expected. May’s increase was revised down by 92,000 to 886,000.
ANZ economist Rahul Khare said the figures from the report provided “another sign that activity and employment in the service sector is rebounding quickly.” However, he also noted “the ADP data has not been a particularly good predictor of non-farm payrolls during the pandemic…”
US Treasury yields barely moved on the day. By the close of business, the 2-year Treasury bond yield remained unchanged at 0.25%, the 10-year yield had slipped 1bp to 1.47% and the 30-year yield finished unchanged at 2.09%.
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 June 2022 implied an effective federal funds rate of 0.15%, 5bps above the current spot rate.
Employment numbers in net terms increased across businesses of all sizes, with gains fairly evenly distributed for a fourth consecutive month. Firms with less than 50 employees filled a net 215,000 positions, mid-sized firms (50-499 employees) gained 236,000 positions while large businesses (500 or more employees) accounted for 240,000 additional employees.