Summary: ADP payrolls up by 330K in July; less than half consensus expectation; June increase revised down by 12K; result at odds with recent job vacancy reports but may lower July NFP expectations; figures up across firms of all sizes, modest bias towards mid-sized firms; 95% of gain in services sector, led again by leisure/hospitality 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 330,000 in July, less than half the 675,000 which had been generally expected. June’s increase was revised down by 12,000 to 680,000.
“The data were at odds with record numbers of jobs vacancies and we’d be cautious in reading too much into the number ahead of Friday’s payrolls data,” said ANZ economist Daniel Been.
NAB currency strategist Rodrigo Catril took a harder line, saying the size of the increase “inevitably will have many questioning” current market expectations for the upcoming July non-farm payrolls report.
US Treasury yields barely moved a touch higher on the day. By the close of business, 2-year and 10-year Treasury bond yields had each inched up 1bp to 0.18% and 1.18% respectively while the 30-year yield finished unchanged at 1.84%.
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 July 2022 implied an effective federal funds rate of 0.11%, about 2bps above the current spot rate.
Employment numbers in net terms increased across businesses of all sizes, with a modest bias towards mid-sized firms. Firms with less than 50 employees filled a net 91,000 positions, mid-sized firms (50-499 employees) gained 132,000 positions while large businesses (500 or more employees) accounted for 106,000 additional employees.