Data published by the Automatic Data Processing Company (ADP) on Thursday showed that US private sector employment rose by 164,000 in December and annual wages rose 5.4%. This reading followed the increase of 101,000 (revised from 103,000) recorded in November and came in better than market expectations of 115,000.
“We are returning to a labour market that is largely in line with pre-pandemic employment and although wages were not the cause of the recent wave of inflation, now that wage growth has slowed, any risk of a wage and price spiral has disappeared.”
Private sector employment increased by 164,000 jobs in December, and annual wages rose 5.4 percent year-on-year, according to ADP’s December National Employment Report released by the ADP Research Institute in collaboration with Stanford’s Digital Economy Lab The ADP National Report An independent measure and high-frequency view of the private sector labor market based on actual and anonymous salary data of more than 25 million US employees.
The Jobs and Wage Insights report uses accurate, anonymous and aggregated salary data from ADP to present a representative picture of the private sector labor market. The report details the total change in private employment for the current month, and the weekly jobs data from the previous month. Given that ADP payroll databases Core is constantly updated, the report provides high-frequency and almost real-time measurement of US employment. This metric reflects the number of employees listed on the payroll of ADP clients (payroll recruitment) to provide a richer understanding of the labor market. ADP’s pay scale uniquely captures the earnings of a group of approximately 10 million employees over 12 months.
Market Reaction to ADP Employment Report
The immediate market reaction to the private sector employment data was subdued. The US dollar index (USD) recorded its last small daily losses at 102.35. The US dollar was the weakest against the euro.
The ADP for December will be released on Thursday. This classification is officially approved for private sector employment and wages, and is usually released before the official Nonfarm Payrolls (NFP) report is released.
The difference between the ADP and NFP numbers is always the most distinctive and their differences are no different from the official numbers generated by the Work Strike Bureau. However, market participants are paying attention to ADP figures due to multiple employment-related explanations that will be released in the days leading up to the publication of a non-agricultural report. Back in November, according to this specialty, the private sector colors 103,000 new jobs, recording “moderate growth in hiring and another signature in login.”
The Federal Reserve of the United States has long been for its strong labor market and the growth of the group that poses a significant risk of internal inflation. With that in mind, in a November report of its kind for decision-makers who chose not to send out the massive cash. To help respond to changes, the prospects for domestic change in the growth rate are modest, without increasing.
The ADP Research Institute released its December jobs survey on Thursday. This survey is an independent estimate of employment and wages in the private sector, usually released two days before the release of the official Nonfarm Payrolls (NFP) report. .
The relationship between ADP and NFP numbers is not always the most accurate and its results tend to differ from the official job creation figures provided by the Bureau of Labor Statistics. However.
The strong US ADP employment report pushed the dollar higher as bond yields rose
The US dollar is currently trading higher against a basket of major currencies, supported by the rise in the 10-year Treasury yield, which is close to 4%. This rise comes in the wake of a report revealing stronger than expected job growth in the private sector. The dollar index reached its highest level in nearly three weeks, driven by recent labor market data and Federal Reserve meeting minutes.
Minutes from the Fed’s December meeting, released on Wednesday, show that officials are content to get inflation under control but are cautious about the risks of overly restrictive monetary policy. However, the minutes did not provide clear clues about when the Fed might start easing interest rates.
Strong Labor Market Data Thursday’s ADP report indicates private payrolls rose by 164,000 in December, beating Dow Jones’ forecast of 130,000. Furthermore, the last full week of 2023 saw a decline in total unemployment claims, underscoring the strength of the US labor market.
The market is also focusing on inflation in the euro zone, as the euro has recently risen against the dollar following inflation reports from France and Germany. These numbers are likely to influence the interest rate decisions made by the European Central Bank, affecting the euro’s performance in the short term. Meanwhile, the pound sterling rose modestly, reflecting the dynamic interplay between global economic indicators.
Investors are now awaiting Friday’s non-farm payrolls report, which is expected to show an increase of 170,000 payrolls, according to the Dow Jones Index, which could provide more clarity on the path of the Fed’s interest rate adjustment.
Currency forecast: the impact of European services data and US economic reports
The currency market saw mixed movements between EUR/USD and GBP/USD GBP/USD 1.27084 USD (+0.68%). The EUR/USD pair fell significantly, falling 0.16% to close at 1.0921.
This decline is likely related to the release of economic data and the minutes of the Federal Open Market Committee (FOMC) meeting, which strengthened the position of the US dollar against the euro. The minutes of the FOMC meeting may have indicated a slowdown in the pace of interest rate cuts, which strengthened the dollar.
Conversely, GBPUSD rose modestly, up 0.41% to close at 1.2664. This upward trend may be attributed to the stable economic environment in the UK, as evidenced by the flat downstream services PMI of 52.7, indicating strong economic activity in the UK.
Looking ahead, the focus today is shifting to a large number of data from the European services sector and crucial US economic releases, including the US Non-Farm Payrolls and Unemployment Claims.
These data points are expected to provide further guidance for the EUR/USD and GBP/USD pairs, reflecting the continued impact of regional economic conditions and policy expectations on currency market dynamics.
As of January 4, the EUR/USD forex pair is facing a critical market turn, which is reflected in its slight rise to 1.09316, up 0.12%. The pivot point of the pair is currently at $1.0894. This level is pivotal to determine the next direction of the pair. Resistance levels were set at $1.0966, $1.1007 and $1.1081, indicating potential points where bullish momentum could face obstacles.
