The ADP Private Sector Employment Survey posted a negative reading for the first time in more than two years, reflecting a drop in service payrolls. None of the economists surveyed expected this former top tier indicator to post negative jobs growth.
The data, however, is not as bad as it appears as the negative reading was the result of companies afraid to hire rather than outright firings. ADP commented “companies are reluctant to replace departing workers, the reason as to why there were job losses.”
As noted numerous times the correlation between ADP and the BLS labor report has waned considerably over the years. However, the Survey can offer some insight as to whether there may be an upside or downside surprise in today’s BLS data.
Speaking of jobs, the latest data released by the US office of Personnel Management (OPM) indicates that since the beginning of the fiscal year only 23,000 positions have been eliminated. The federal government employed 2,289,472 workers on May 31, 2025, down from 2,312,216 on September 30, 2024. The number of job eliminations is considerably lower than expected, primarily the result of new hires according to OPM.
To place the above data into perspective, Amazon has 27,000 less employees than a year ago in a workforce totaling 1.5 million according to CNBC.
As widely noted, DOGE is/was expected to eliminate over 500,000 federal workers and contractors. When will these job eliminations begin showing up in the data? Is/was DOGE more bark than bite? The current net number is insignificant.
Commenting on yesterday’s market, the Treasury yield curve steepened considerably as longer dated debt sold off as the shorter dated debt remained unchanged. Is this result of the potential passage of the “Big Beautiful Bill?” It is widely believed the “BBB” will increase the deficit.
Many rely upon the CBO to draw such conclusions, but all must remember the CBO has consistently missed their estimates by a large amount given that the mechanics used by the CBO are static, defined as no change in spending behavior.
A basic rule of economics is the less that you tax a product the more demand that is generated and vice versa [The higher the tax the lower the demand] The CBO generally disregards this basic tenant assuming behavior will remain static from current levels.
Equities were bifurcated. The Dow was essentially unchanged while the NASDAQ posted about a 1% advance.
Second quarter earnings season commences next week. To the surprise of most, the inflationary impact of the tariffs have yet to show up in the data, perhaps the result of companies absorbing price increases to protect market share.
If this is indeed the case, margins should suffer. This is a dangerous environment with a concentrated market trading at current multiples.
As note June’s employment report is released at 8:30. The market is expecting a 110k and 012K increase in nonfarm and private sector payrolls, respectively, a 4.3% unemployment rate, a 0.3% increase in average hourly earnings a 34.3 hour work week and 62.5% labor participation rate.
How will the data be interpreted?
Last night the foreign markets were mixed. London was up 0.38%, Paris down 0.09% and Frankfurt up 0.06%. China was up 0.18%, Japan up 0.06% and Hang Seng down 0.64%.
Futures are flat but this could change significantly based upon the 8:30 data. Moreover, equities close at 1:00 PM in honor of the 4th of July holiday. The 10-year is up 5/32 to yield 4.27%.
