US Economic News: ADP Employment Report Miss and Market Reaction

June’s ADP employment report registered a significant miss, with private sector jobs decreasing by 33,000. Economists had anticipated an increase of 100,000 positions, and this negative print marked only the second time in the past year that the report showed job losses.

Financial markets initially reacted negatively, opening lower on Wednesday after the report’s release. However, sentiment shifted later in the day following an announcement by President Trump that the US and Vietnam had finalized a trade agreement. Better-than-expected trade deal optimism raised hopes of similar agreements being reached before the July 9th deadline, providing market reassurance.

This market confidence influenced movements in interest rate expectations. The probability of the Federal Reserve cutting interest rates by 25 basis points later this month increased to 23.8%, compared to 20.7% assessed the previous day. Nonetheless, Federal Reserve Chair Jerome Powell maintains that data releases, including upcoming employment figures, will fundamentally determine the timing of any potential rate action.

Around the crucial 2 p.m. ET release, market attention shifts to two major reports: the weekly initial jobless claims data and the highly anticipated June Employment report from the Bureau of Labor Statistics.

Economists forecast that initial claims for unemployment benefits for the week ending June 28th will likely register at 240,000. A figure at the expected level would fuel enthusiasm for the labor market; conversely, signs of elevated layoffs could dampen market sentiments.

The BLS report is projected to show the addition of 110,000 nonfarm payrolls in June. Unemployment is expected to edge up slightly to 4.3%, compared to 4.2% reported in May. Market reaction will hinge on whether these numbers align more closely with projections, a possibility, however, unlikely, given the divergent signals emerging from preliminary economic indicators.

US trading calendars incorporate Thursday’s scheduled markets but feature an abbreviated Thursday trade, with regular trading suspended across all major exchanges on Friday, July 5th, for the Independence Day holiday observance.