U.S. job numbers fell the hardest in nearly three years. What will the Fed decide?
Wall Street's forecast called for an increase in employment instead of a decline
Private employers in the U.S. sharply accelerated job cuts in November, according to data from ADP, which processes payroll statistics and publishes employment reports. As a result, the number of jobs fell by the most since the beginning of 2023, adding to fears of a more pronounced weakening of the labor market, Bloomberg writes. This came as a surprise to Wall Street, Investing.com points out.
U.S. companies lost 32,000 jobs last month, according to the report. The median forecast of economists surveyed by Bloomberg suggested an increase of 10,000. ADP reported a 42,000 increase in hiring in October.
Why it's important
ADP reports make up for the lack of government data that covers the entire economy but has not been released for a long time due to the US government shutdown. The shutdown has already ended, but the official statistics have not yet appeared and will not appear until the next meeting of the US Federal Reserve, which will be held next week.
"With the next employment report [from the Bureau of Labor Statistics] scheduled for Dec. 16 and the release of the consumer price index on Dec. 18, there are few events on the calendar that would prevent a rate cut on Dec. 10," Goldman Sachs chief economist Ian Hatzius wrote in a note to clients on Sunday, as quoted by CNBC.
"The message is clear: U.S. job creation has signaled another signal of stagnation," Florian Ielpo of Lombard Odier Asset Management told Bloomberg, "But (...) the big question now is what the Fed will actually do with this data, given such a divided voting population. Monday's ISM industrial activity index and today's ADP report are literally screaming "rate cuts!" and markets are likely to pick up on that sentiment."
How the market reacted
Futures on major U.S. stock indices slightly accelerated growth immediately after the publication of ADP, but then reversed. Fifteen minutes before the opening of the session, futures on the S&P 500 remained in the plus by less than 0.1%, exchange-traded contracts on the Nasdaq Composite fell in price by 0.2%. Government bond yields fell. The new figures did little to change confidence that the U.S. Federal Reserve will continue easing, according to Bloomberg.
Before the ADP report, the probability that the regulator would cut rates at its next meeting was estimated at more than 89%, according to FedWatch's trader sentiment monitoring tool. Expectations eased slightly after the release. Goldman Sachs forecasts that the Fed will respond with a rate cut in December and two more cuts of a quarter percentage point next year.
This article was AI-translated and verified by a human editor
