June ADP Private Payrolls Rise by 98,000, Below Forecasts in Lowest Since March, as Dollar Dips and Gold Holds Steady

TradingKey - Data released by Automated Data Processing (ADP) on Wednesday showed that US private sector employment increased by 98,000 in June, lower than the market expectation of 118,000, with the previous value revised to 122,000. This marks the lowest increase since March this year.

Job growth was primarily driven by the service sector, but the distribution across industries was highly uneven. The service sector added 96,000 jobs, with education and health services (+48,000), trade/transportation/utilities (+15,000), and financial activities (+14,000) contributing the majority of the gains. The goods-producing sector added only 2,000 jobs, with manufacturing contributing 5,000, construction adding 2,000, and natural resources/mining shedding 5,000. The leisure and hospitality industry added only 2,000 jobs, continuing its weak trend with sluggish hiring for the sixth consecutive month.

By business size, small businesses (1-49 employees) added 53,000 jobs, medium businesses (50-499 employees) added 29,000, and large businesses (500 or more employees) added 25,000.

On the wage front, year-over-year pay growth for job-stayers was 4.4% in June, unchanged from the previous month. For job-changers, year-over-year pay growth jumped to 6.6% from 6.0% in May, indicating that the window for securing higher pay by changing jobs is expanding.

Nela Richardson, chief economist at ADP, stated: "The hiring pace is telling a story about both supply and demand. We know people are taking longer to find jobs, but some industries are also showing signs of tight labor supply. At present, the overall effect is a slowdown in job creation."

Following the data release, the US Dollar Index (DXY) dipped slightly in the short term to 101.42. Spot gold showed little volatility, trading at $4,024.8 per ounce. US Treasury yields edged down slightly, with the 10-year yield last up 6.31 basis points at 4.485%.

Employment Changes Across Key Industries in the ADP Report: A Quick Look

• Construction: +2,000 in June, +8,000 in May
• Manufacturing: +5,000 in June, +3,000 in May
• Trade/Transportation/Utilities: +15,000 in June, +36,000 in May
• Financial Services: +14,000 in June, +7,000 in May
• Professional/Business Services: +2,000 in June, +11,000 in May

ADP Report: Wage Growth Across Key Industries at a Glance

• Construction: Median annual rate 4.6% in June, 4.5% in May
• Manufacturing: Median annual rate 4.9% in June, 4.8% in May
• Trade/Transportation/Utilities: Median annual rate 4.4% in June, 4.4% in May
• Financial Services: Median annual rate 5.1% in June, 5.1% in May
• Professional/Business Services: Median annual rate 4.1% in June, 4.1% in May

ADP data is typically viewed as a leading indicator for the U.S. Department of Labor's monthly nonfarm payrolls report. The U.S. June nonfarm payrolls report is scheduled for release at 20:30 on Friday (July 2).

The market consensus currently expects June nonfarm payrolls to increase by 115,000, with an unemployment rate of 4.3%. Goldman Sachs projects an increase of 130,000, which is higher than the market consensus. Due to different statistical methodologies, ADP and nonfarm payroll data have not always been perfectly synchronized in the past.

Fed Governor Warsh is scheduled to participate in a European Central Bank forum policy panel discussion in Sintra, Portugal, later today. The market will closely monitor his remarks for the latest stance on the inflation outlook and the interest rate path.