US ADP private sector employment rises 62,000 in April vs. 108,000 expected
- Employment in the US private sector grew at a softer pace than expected in April.
- The US Dollar Index holds above 99.00 after the data.
Private sector employment in the US rose 62,000 in April and annual paw was up 4.5% year-over-year, the Automatic Data Processing (ADP) reported on Wednesday. This reading followed the 147,000 increase (revised from 155,000) recorded in March and missed the market expectation of 108,000 by a wide margin.
Assessing the survey's findings, "unease is the word of the day. Employers are trying to reconcile policy and consumer uncertainty with a run of mostly positive economic data,” said Dr. Nela Richardson, chief economist, ADP. "It can be difficult to make hiring decisions in such an environment."
Market reaction
The US Dollar Index edged lower with the immediate reaction and was last seen rising 0.12% on the day at 99.30.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
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