The U.S. ADP jobs report for September revealed stronger-than-expected private-sector hiring, putting pressure on markets as traders weigh its impact on Federal Reserve rate cuts.
Payroll processor ADP reported 143,000 new private-sector jobs in September, surpassing the forecasted 121,500 jobs.
August's job growth, initially reported at 99,000, was revised upward to 103,000. Despite this, the ADP report highlighted a slowdown in job creation over recent months, with figures dropping from 155,000 in June to 99,000 in August.
While ADP data is often an imperfect predictor of the official Bureau of Labor Statistics (BLS) figures, recent months have shown a stronger correlation between the two.
Following the ADP release, the likelihood of a significant Federal Reserve rate cut in November has diminished. According to CME Group’s FedWatch tool, markets are now pricing in a 33% chance of a half-point rate cut at the November 7 meeting, down from 37% on Tuesday.
Additionally, expectations of a cumulative 75 basis points cut across the year’s remaining two meetings dropped to 63%, from 67%.
Earlier in the week, Fed Chair Jerome Powell pointed to revisions in household income gains, which suggest that U.S. consumers are saving more than previously thought. This, in turn, bolsters consumer spending.
Powell also emphasised the resilience of the U.S. economy, noting that it remains in "solid shape," providing the Fed with room to gradually normalise interest rates.