ADP's August employment report showed private sector hiring of just 38,000 jobs, well below the 47,000 consensus estimate and the weakest monthly gain since January. Nearly all the hiring was concentrated in education and health services, meaning the broader private economy added almost nothing. The miss extends a deceleration trend that has been building across recent months.
Weak payroll data raises the probability that the Federal Reserve interprets the labor market as cooling, which increases expectations for rate cuts. That is generally supportive for bonds and growth stocks, but a number this soft also signals that consumer spending power may be eroding, which cuts against cyclical sectors like retail and industrials. Equity investors should watch whether Friday's official Bureau of Labor Statistics report confirms or contradicts this reading.
August 30: July PCE inflation report. September 6: Official August jobs report from the Bureau of Labor Statistics. September 17-18: Federal Reserve rate decision.
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