Summary: ADP payroll numbers increase in May; more than consensus figure; April increase revised down; suggest US job market to continue recovery at “solid pace”; led again by leisure/hospitality sector; figures up across firms of all sizes; gain predominantly 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 978,000 in May, more than the 700,000 which had been generally expected. April’s increase was revised down by 88,000 to 654,000.
“Regardless of the reliability of the ADP report as guide for nonfarm payrolls, the solid ADP print overnight alongside another solid ISM services print suggests the US labour market should recover at a solid pace over coming months,” said NAB currency strategist Rodrigo Catril.
US Treasury yields rose on the day. By the close of business, 2-year Treasury bond yield had inched up 1bp to 0.16% while 10-year and 30-year yields each finished 3bps higher at 1.62% and 2.30% respectively.
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 0.105%, about 5bps above the current spot rate.
Employment numbers in net terms increased across businesses of all sizes, with gains fairly evenly distributed for a third consecutive month. Firms with less than 50 employees filled a net 333,000 positions, mid-sized firms (50-499 employees) gained 338,000 positions while large businesses (500 or more employees) accounted for 308,000 additional employees.