ADP Employment Misses Estimates, Biggest Slowdown Since January 2021

Key Points:

MOST READ: USD in Review Ahead of PCE data – Inflation Remains a Key Driver of USD

US companies saw job creation slow by the most since January 2021 led by the construction sector and followed closely by sectors sensitive to rising interest rates. Gains were experienced in consumer facing sectors of the markets with healthcare and hospitality leading the way.

Nela Richardson Chief Economist at the ADP stated that the data suggests the Federal Reserve’s tightening is having an impact on job creation and pay gains. In addition, companies are no longer in hyper-replacement mode. Fewer people are quitting, and the post-pandemic recovery is stabilizing.

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While there remains signs of a robust labor market the slowdown is likely to further complicate the Federal Reserve’s position heading into its December meeting. Policymakers have been keen to point out the strength and resilience of the labor market as a sign that the economy can withstand further rate hikes. Today’s ADP print however might be the first sign that the ‘lag effect’ of interest rate hikes on wage growth (annual pay dropped from 7.7% to 7.6% in November) and the labor market may be paying dividend. Are we going to see a 50bp hike in December?

Markets will now turn their attention to Fed Chair Powell, PCE data as well as the NFP Jobs report on Friday for the next clues as to the Feds thinking. Friday’s NFP report is forecast to show hiring cooled in November with the unemployment report expected to remain steady at 3.7%.

Market reaction

S&P 500 Daily Chart

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Source: TradingView, prepared by Zain Vawda

Ahead of the opening bell in New York, the US Dollar was weaker with the S&P struggling as well. The bigger picture leaves the Dollar Index and the S&P 500 looking vulnerable to further downside moves. The technicals for the S&P 500 (Chart above) look to be setting up for a break of the ascending trendline which could see a retest of the 50-day MA resting around the 3800 level.

Alternatively, a push higher from here could see the index test the long-term descending trendline hovering around the 4100 area before finding some resistance.

Key Intraday Levels Worth Watching:

Support Areas

Resistance Areas

— Written by Zain Vawda for

Contact and follow Zain on Twitter: @zvawda

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