ADP Employment Growth Slows Sharply, Reinforcing Fed Rate Cut Expectations

U.S. corporate hiring activity slowed significantly in August, with gains falling well short of forecasts, adding fresh evidence that labor market demand is cooling.

The ADP employment report released on Thursday showed an increase of just 54,000 jobs, substantially below market expectations of 68,000 and the revised 104,000 figure from July.

Following the data’s release, market pricing indicated the probability of a Federal Reserve rate cut this month has reached as high as 97%.

Slowing U.S. Hiring Growth Adds to Signs of a Cooling Labor Market

This ADP report, along with other recent indicators, points to a cooling trend in the U.S. job market. The data revealed that employment in sectors such as manufacturing, transportation, and education actually experienced negative growth.

More notably, wage growth data corroborates this trend. The wage growth for job-stayers has slowed to its lowest level since June 2021, which is typically viewed as a sign of easing supply-demand dynamics in the labor market.

These figures are consistent with recent phenomena such as a decline in job openings and a drop in corporate hiring intentions, collectively painting a picture of weakening employment momentum.

Rate Cut Expectations Heat Up as Market Focus Shifts to August NFP

The weak employment data has directly reinforced investor expectations that the Federal Reserve will adopt a more accommodative monetary policy.

The prevailing market sentiment is that, given concerns about a potential further weakening of the labor market, Fed officials will decide to cut interest rates at their policy meeting later this month.

Following the ADP data release, all eyes will turn to the U.S. August Non-Farm Payrolls report, set to be published on Friday. Its performance will be a key reference for the Federal Reserve’s interest rate decision.

XAUUSD, H4 Chart | Source: Ultima Market MT5

On the 4-hour chart, gold is currently rebounding, supported by the 13-period MA.

However, the stochastic oscillator is not showing a significant rise, suggesting a potential bearish divergence between the price and the indicator may be forming.

Caution is warranted, as the price could resume its short-term corrective downtrend after the rebound concludes.

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