The ADP National Employment Report is a monthly report which provides an estimate of US non-farm employment in the private sector. Since the report began to be published 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. Even so, the latest report has provided another strong increase.
January’s report indicates private sector employment grew by 291,000, almost double the expected figure of 150,000 and a good deal more than December’s revised increase of 199,000.
NAB currency strategist Rodrigo Catril is not a great fan of the predictive powers of the ADP report, saying “this indicator doesn’t have a great track record at predicting US non-farm payrolls…” However, he noted “the strength of ADP was sufficient to offer some offset” to a “disappointing” fall in order backlogs in the ISM non-manufacturing report.
US Treasury yields increased along the curve but more so at the long end. By the end of the day, the 2-year Treasury bond yield had gained 2bps to 1.44% while 10-year and 30-year yields had each increased by 5bps to 1.65% and 2.14% respectively.
In terms of likely US monetary policy, according to federal funds futures contracts the probability of a rate cut in the first half of 2020 remained small. The implied likelihood of a 25bps cut at the March meeting of the FOMC slipped from 9% to 7% while a move in April remained unchanged at 23%. Even a July cut looked less likely; prices at end of the day implied a rate cut at the FOMC’s July meeting had fallen from 55% to 49%.