Red-Hot US Job Market Is Trump’s Shield against a Recession


Sep. 4 2020, Updated 6:51 a.m. ET

President Trump’s reelection chances depend on a strong US economy. Today, based on the ADP National Employment Report, the US non-farm jobs in the private sector rose by 202,000—far above the expected rise by 150,000 from Moody’s Analytics.

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Market focusing on job reports

A stronger job market is one of the Trump administration’s important achievements. In November, President Trump tweeted“Stock Market up big. New and Historic Record. Job, jobs, jobs!”

Also, a stronger job market in the US private sector could be a bullish driver for the S&P 500 Index. Today at 10:22 AM ET, the S&P 500 Index (NYSEARCA:SPY) has risen 0.3%.

The Dow Jones Industrial Average Index (NYSEARCA:DIA) and the Nasdaq-100 Index were also in the positive territory. The equity market moved up despite Iran’s missile strikes on US military bases in Iraq. Usually, a war-like situation could drag the equity market. However, ADP employment data could be behind equities’ rise.

ADP report

According to ADP’s job report, medium businesses contributed job growth of 88,000 in December—the highest among the company sizes. According to ADP, medium businesses have an employee strength of 50–499. Large businesses, which have 500 or more employees, contributed to a rise of 45,000 in total private-sector job growth. The jobs in small businesses rose by 69,000 last month. 

The service-providing sector added 1,73,000 jobs in December—the highest among the goods-producing and franchise employment sectors, based on ADP data.

In the service-providing sector, trade, transportation, and utility subsector jobs grew by 78,000. However, the information subsector reported a loss of 14,000 jobs. The leisure and hospitality subsector jobs fell by 21,000 last month.

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Manufacturing slowdown and job market

According to ADP data, the goods-producing sector’s jobs grew by 29,000. In this sector, the manufacturing subsector reported a decline of 7,000 jobs. The ISM manufacturing PMI was at 47.2% for December. A manufacturing PMI below 50% suggests a contraction in manufacturing activities.

Since August, the ISM US manufacturing PMI reading has been below 50%. Read Key Takeaways from December’s Manufacturing PMI to learn more. In 2019, Barclays declared an “industrial recession.” The rise in input costs due to the US-China trade war could be behind the manufacturing slowdown.

Also, in December, the natural resources and mining subsector reported a decline of 1,000 jobs on a month-over-month basis. However, if oil prices rise, jobs could grow in this subsector.

Recession risk

In 2019, analysts expected a recession after the yield curve inversion. However, a stronger job market and the Fed’s dovish stance could reduce the risk of a recession. Ed Yardeni of Yardeni Research said, “I’m thinking that the number 2020 strongly implies zero chance of a recession, with real GDP growing around 2.0% while inflation remains just below 2.0%,” based on a MarketWatch report.

Job market and gold prices

A stronger jobs report is a bearish development for gold prices. At 10:55 AM ET, gold active were at $1,572.7 per ounce—almost on par with yesterday’s closing level. However, in today’s trade, gold prices crossed the $1,600 per ounce level due to US-Iran tensions.

Read How Global Markets, Oil, and Gold Reacted to Iran Strikes to learn more.


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