The ADP March employment report was published on May 2. The report offered deeper insight into employment trends across different sectors in the US employment market. ADP and Moody’s Analytics prepared the monthly report. Mark Zandi, the chief economist of Moody’s Analytics, said that the US employment market could be overheating. Businesses are adding more than 200,000 jobs per month despite rising trade tension and a volatile (VXX) financial market (VOO). The unemployment rate could fall below 4% in the near term, which could mean that the economy overheats. An overheated economy could lead to higher inflation (VTIP), which could force the Fed to take corrective measures like increasing rates.
Sectors that improved last month
According to the ADP April employment report, the job growth in the professional and business services sector was the highest with 58,000 new jobs added. The manufacturing sector, which contributed heavily to the job growth in the last two months, had a lower number of jobs added in April. A healthy level of job growth was reported for the administrative, healthcare (XLV), and education sectors. The trade and transport sector and the financial sector also reported a decline in hiring in April.
Key takeaway from the April report
Increased hiring is a welcome sign for the economy. In the current climate where the business cycle of expansion seems to be nearing the end, an overheating employment market isn’t warranted. An overheating employment market increases the risk of higher inflation (TIP) and higher rates. President Trump’s tax cuts and tariff policies could inject some more energy into the business cycle, which could lead to continued job growth in the near term.