US ADP Nonfarm Data Points To Half-Point Rate Hike

On Wednesday afternoon March 30 (GMT+3), the US ADP Nonfarm Employment Change data reported an increase in 455,000 jobs. This figure is slightyly more than the expected increase of 450,000, and down from the previous month’s value of 486,000. While higher than expected, March’s ADP Employment numbers are still the lowest seen since August 2021.

Leading the gains are jobs from the leisure and hospitality sector, which has added 161,000 jobs as pandemic-related shutdowns and travel restrictions ease all around the world. Job gains were spread evenly among company sizes, with small businesses adding 90,000, medium companies (50-499 workers) adding 188,000, and large businesses adding 177,000.

Post-Market

The ADP figures have hinted at a more robust-than-expected US jobs market, which analysts say could give the Fed another reason to be more aggressive with interest rate hikes. Several Fed officials, including Richmond Fed President Thomas Barkin and Philadelphia Fed President Patrick Harker, have expressed their openess to a hawkish half-point hike at their May meeting in order to fight surging inflation.

For now, the labor market is still seeing solid hiring, said Peter Boockvar, chief investment officer at Bleakley Advisory Group.  However, he adds that “labor market stats are always lagging and only follow changes in economic activity. And if the biggest component of US growth… the consumer, starts to buckle under the high inflation they are experiencing, then that will eventually impact hiring”.

Meanwhile, the ADP figures are also outweighed by a combination of subdued US GDP numbers and rising positive sentiment about the Russia-Ukraine war. This sees US Treasury yields dropping and the curve inverting, while the US dollar index plunged below the weeks-long support of 98.00, giving impetus for rebounds for both the pound and the euro.

On the back of a weakening dollar and Treasury yields, as well as fading optimisim about the situation in Eastern Europe, gold has also rebounded from its two-month low seen after the Russia-Ukraine peace talks on Tuesday. Volatility continues to plague the precious metal as sentiment about the conflict continues to flip back and forth. Bernard Dahdah, precious metals analyst at Natixis, has said that the gold market will remain volatile in the near term as the market continues to react to headlines surrounding the war, and that “The market should ignore the words from Russia until the bombs stop”.

For now, market participants are advised to keep an eye out for the upcoming US Nonfarm Payrolls data, which will be released on Friday, April 1^st, at 15:30 (GMT+3). Current forecast for the data is a growth of 490,000. This number will be closely watched by Fed officials, and will be likely be key to futher interest rate decision.

As a friendly reminder, do keep an eye on market changes, control your positions, and manage your risk well.