Our Take on the March ADP Jobs Report
The first part of today’s economic data puzzle has arrived. Here's what it tells us about jobs, inflation and Fed policy.
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* ADP’s March Employment Report showed stronger job growth, sticky wage inflation.
* Report supports growing probability of fewer rate cuts later in 2024.
* The March Services PMI reports arrive later this morning.
The first part of today’s economic data puzzle, the March ADP Employment Report, showed better-than-expected job growth during the month while its wage findings support the view inflation remains sticky. The data help build the case for not only a vibrant economy and continued real wage gains but also support the Fed not rushing to embark on a rate-cutting cycle. Indeed, the numbers support our thinking that rate-cut expectations will get pushed into H2 2024 with the odds of three rate cuts this year quickly falling. In line with this view, the 10-Year Treasury yield inched up further following ADP’s revelations.
In light of all this, we will stick to our portfolio plan. Next up, at 9:45 a.m. ET and 10 a.m. ET, are March Service PMI reports from S&P Global and ISM. As we await those releases, let’s dig into the March ADP report, by the numbers:
Total job growth came in at 184,000, with strong gains in construction, trade, and leisure & hospitality, up from 140,000 in February and 111,000 in January. This supports the improving economic picture painted by the March Manufacturing PMI data this week.
ADP’s findings also showed March wage gains for job-stayers of 5.1% year over year, unchanged with February. That’s another data point for sticky inflation but gains for job-changers accelerated to 10% year over year, marking the second straight increase – speaking to renewed inflation pressures in the system. Arguably, not the “good data” Fed Chair Powell and his cohorts want to see.
