ADP Employment Report Preview: US private-sector jobs expected to grow at moderate pace in December
- The ADP survey is expected to show the US private sector added 115K new positions in December.
- The data is relevant ahead of the Nonfarm Payrolls report to be out on Friday.
- Recent Private Payrolls align with the Federal Reserve’s view of a moderate pace of job creation.
The ADP Research Institute will release the December Jobs Survey on Thursday. The survey is an independent estimate of private-sector employment and pay, usually released two days ahead of the official Nonfarm Payrolls (NFP) report.
The correlation between ADP and NFP numbers is not always the most accurate and its results tend to diverge from the official job creation numbers provided by the Bureau of Labor Statistics. Still, market participants pay attention to the ADP figures as part of the multiple employment-related releases that take place in the days preceding the NFP publication.
Back in November, and according to this survey, the private sector added 103K new positions, reporting “moderate growth in hiring and another slowdown in pay gains.”
The United States (US) Federal Reserve (Fed) has been long considering a strong labor market and wage growth as a major inflationary risk. With that in mind, the November report brought relief to policymakers who opted out of massive monetary easing. The moderated pace of job creation and salaries increases are helping the local economy grow at a modest pace, without building inflation.
When will the ADP Jobs Survey will be released and how could it affect EUR/USD?
In such a scenario, the ADP Research Institute is expected to report on Thursday that the private sector added 115K new positions in December, slightly above the 103K added in November. Back then, ADP reported that annual pay rose 5.6%, the smallest monthly gain since September 2021, with services-related industries providing the most new positions.
Further signs of loosening in the labor market will likely revive bets on upcoming rate cuts. The US Fed has maintained the benchmark rate unchanged for the last three meetings, in the hopes their former tightening will continue to cool price pressures. The chance of additional rate hikes is pretty much null, as the central bank will then face the risk of a steep economic setback, instead of a soft landing.
As of lately, financial markets have been taking back bets on aggressive rate cuts throughout the first half of the year, but a softer-than-anticipated report may bring them back. Investors may welcome news that the labor sector is cooling and drop the US Dollar.
Valeria Bednarik, Chief Analyst at FXStreet, notes: “The US Dollar entered 2024 with a strong footing, partially backed by profit taking and partially due to mounting caution ahead of first-tier data releases. The EUR/USD pair currently trades near the 1.0900 threshold after peaking at 1.1139 in December and is technically poised to extend its slump. A critical support area comes at 1.0880, where the pair has a relevant intraday bottom from mid-December. If the price zone gives up, the slump could extend to the next threshold at 1.0800.”
Bednarik adds: “However, the pair can quickly regain the 1.1000 psychological mark and its bullish tone alongside, if market participants believe the data will help the Fed anticipate a rate cut to the first quarter of the year. Once beyond the level, resistance can be found at 1.1065 and 1.1120.”
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 1.40% | 0.66% | 0.91% | 1.49% | 1.86% | 1.44% | 1.38% | |
| EUR | -1.26% | -0.58% | -0.35% | 0.28% | 0.46% | 0.20% | 0.08% | |
| GBP | -0.67% | 0.58% | 0.26% | 0.85% | 1.28% | 0.78% | 0.65% | |
| CAD | -0.92% | 0.32% | -0.07% | 0.56% | 0.92% | 0.53% | 0.43% | |
| AUD | -1.51% | -0.25% | -0.81% | -0.61% | 0.16% | -0.08% | -0.18% | |
| JPY | -1.86% | -0.40% | -1.11% | -0.74% | -0.18% | -0.19% | -0.53% | |
| NZD | -1.46% | -0.20% | -0.79% | -0.54% | 0.05% | 0.23% | -0.14% | |
| CHF | -1.33% | -0.07% | -0.67% | -0.40% | 0.19% | 0.49% | 0.14% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
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