April ADP Private Payrolls Surprisingly Strong as Job Growth Hits 15-Month High. Will the Fed Stay on Hold Until 2027?

TradingKey - Fresh ADP data released this Wednesday (May 6) showed that the U.S. private sector added 109,000 jobs in April, marking the largest increase in 15 months. This figure not only exceeded the 99,000 expected by economists in a Reuters poll but also accelerated significantly from a downwardly revised 61,000 in March, marking the tenth consecutive month of employment growth.

Analysts suggest this may indicate that parts of the frozen labor market are gradually recovering after months of unusually sluggish hiring; the data also reinforced market expectations that the Federal Reserve will maintain interest rates unchanged until 2027.

The U.S. labor market is currently in a stable state of "low hiring, low layoffs," as Elizabeth Renter, senior economist at NerdWallet, noted: "The labor market has been in a solid but fragile state for some time, neither expanding significantly nor deteriorating remarkably."

However, Renter believes this is not yet a reason for full optimism regarding the labor market. She stated that with geopolitical conflicts in the Middle East and oil price shocks not yet fully resolved, and amid ongoing economic policy uncertainty, a single strong jobs report is insufficient to prove a fundamental change in labor market conditions.

Data showed that job gains in April were concentrated in a few sectors and unevenly distributed overall, with the primary growth driver coming from the services sector, which added 94,000 positions. Notably, manufacturing—a sector Trump specifically hopes to bring back via tariff policies—added only 2,000 jobs, representing quite limited growth. Regarding wages, annual pay growth for job-stayers was 4.4%, a slight cooling of 0.1 percentage point from the previous month.

ADP data has repeatedly shown discrepancies over the past few years. Carl Weinberg, chief economist at High Frequency Economics, pointed out that actual private payroll data is typically lower than ADP forecasts. The market is now more focused on the non-farm payrolls report due this Friday. A Reuters poll shows that Friday's non-farm payrolls are expected to increase by approximately 62,000, far below the ADP figure, with the unemployment rate expected to remain unchanged at 4.3%.

Based on this forecast, markets expect that the labor market has not deteriorated significantly of late. At the April FOMC meeting last week, Fed officials voted to keep interest rates steady, but there was a rare four-vote dissent. Three of those dissenters did not object to the decision to hold rates steady itself but disagreed with the statement's phrasing, arguing it is currently inappropriate to signal that the next move will be a rate cut.

Currently, the biggest variable swaying Federal Reserve monetary policy is the transit situation in the Strait of Hormuz. Minneapolis Fed President Neel Kashkari even raised the possibility of rate hikes in a statement: if the closure of the Strait of Hormuz persists, "consecutive rate hikes" might be necessary, "even at the cost of further weakening in the labor market."