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ADP: US Job Market Could Be Overheating


May. 3 2018, Published 8:39 a.m. ET

ADP National Employment Report

ADP, a human capital management solution provider, releases a monthly report on US non-farm employment. The report captures the change in the number of jobs added across different sectors in the US. ADP claims to process the payrolls of more than 24 million US workers, which provides first-hand insight into the US employment market. The monthly report is prepared using actual and anonymous payroll data from 411,000 US clients that ADP services. The report precedes the monthly non-farm payrolls report from the BLS (Bureau of Labor Statistics). The report helps prepare investors for any surprises in the non-farm payrolls report.

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Latest ADP report

According to the ADP April National Employment Report, US private sector employment added 204,000 jobs in April. The hires and number of jobs added in April were lower than the revised reading of 241,000 jobs in March. According to Ahu Yildirmaz, the vice president and co-head of ADP’s research institute, the labor market continued to tighten. As a result, employers in the skilled sector could have a hard time finding a suitable workforce. The job growth in small and medium businesses (IJH) beat the growth in large businesses (IWD). The job growth in the skilled professional and business services industry accounted for more than 50% of all the jobs added in April.

Higher job growth could push yields higher

The US bond market (BND) witnessed a sharp sell-off in recent months. The US bond market will likely remain under pressure if the BLS non-farm payrolls addition is in line with the ADP estimate. All of the discussions surrounding the ten-year (IEF) yield breaking above 3% could be back in focus. Investors need to be prepared for higher rates. The Fed is set to increase the interest rates three more times this year. As a result, the bond (AGG) yields would move higher. Next, we’ll discuss the ADP employment report. We’ll see which sector had the maximum job gains in April.


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