Private Sector Hiring Sends Another Sign of Labor Weakness

Rates fall slightly ahead of crucial labor data. The short end of the rate/yield curve opened 5bps lower today after ADP employment showed further signs of slowed hiring. However, rates reversed course and hit session highs after ISM Services figures were higher than expected, coming in at 54.6 versus 54.0 expected. Ultimately, rates gradually declined throughout the afternoon to close 1-2bps lower while the long end of the curve dropped 3-4bps. Markets now await tomorrow’s nonfarm payrolls and unemployment rate data, hoping for stronger prints than we have seen throughout the past month.

Janet Yellen labels the labor market “healthy” amid broad concerns. Treasury secretary Yellen is optimistic about the US labor market despite several data points that have showed recent deterioration. She stated that “we have a good, healthy labor market where we continue to create jobs.” While July’s nonfarm payrolls slowed to 114k jobs added, tomorrow’s data is expected to show a rebound to 165k jobs added in August. Furthermore, though the unemployment rate spiked to 4.3% in July, Yellen argued that “the unemployment rate we have today by historical standards would be considered very low.” The unemployment rate is expected to have fallen to 4.2% in August.

New jobs added in August hit multi-year low. ADP employment data released today showed 99,000 new private sector jobs were added in August, below estimates of 145,000 and last month’s 111,000 print. The results marked the slowest increase since January 2021. Similarly, the release also showed that wage growth slowed in the month. ADP chief economist Nela Richardson said, “The job market’s downward drift brought us to slower-than-normal hiring after two years of outsized growth…the next indicator to watch is wage growth, which is stabilizing after a dramatic post-pandemic slowdown.”