ADP Jobs Report: Dollar Slightly Higher As Upside Potential Stays Limited

The dollar is marginally higher in early US trading after ADP jobs data came in much better than predicted. However, as traders remain cautious ahead of tomorrow’s non-farm payrolls report, the upside seems limited. The pound is the second most valuable currency today, followed by the yen. Commodity currencies, on the other hand, are generally weaker, with the Australian and New Zealand Dollars leading the way.

Initial unemployment claims in the United States fell -20k to 385k in the week ending May 29, better than the 410k expected. Initial claims fell by -30.5k to 428k on a four-week moving average. Both were at their lowest levels since March 14, 2020. The number of people filing new claims increased by 169, to 3771, in the week ending May 22. The four-week moving average of continuing claims increased by 23 thousand to 3688 thousand.

In May, ADP jobs reported a 978k increase in private sector employment in the United States, well exceeding the 695k expected. Small firms added 333k jobs, medium-sized firms added 338k, and large businesses gained 308k, according to firm size. Positions in the goods-producing sector increased by 128k, while jobs in the service sector increased by 850k.

NFP Predictions: After ADP jobs report a rebound Is Possible

This month’s data will be more noteworthy than normal because the Fed is closely monitoring employment and inflation as it considers whether to begin decreasing its asset purchases.

Last month’s dismal NFP result was an unexpected hard blow for speculators and policymakers who were expecting strong growth of around 1 million net new jobs. As shown in the graph below, traders have moderated their expectations for this month’s report, which will be more important than usual as the Fed assesses when to begin reducing its asset purchases by looking at employment and inflation.

The situation of the US job market is more unclear and turbulent than typical as it emerges from the tremendous disruption caused by the COVID outbreak, as we were reminded of last month. Given the current state of affairs, the leading signs point to a nearly as-expected reading in this month’s NFP report, with headline job growth probably falling between 550k and 650k.

The US employment statistics released on Thursday showed better-than-expected results, raising the stakes for the NFP on Friday. Payrolls certainly climbed considerably by pre-COVID standards, according to analysts, but see some downside risk this month compared to the consensus.