US August ADP Weakens Unexpectedly With Only 38,000 Jobs Added Below Expectations, Boosting Rate Cut Bets

TradingKey - Data released by Automatic Data Processing (ADP) on Wednesday showed that US private-sector employment increased by 38,000 in August, below market expectations of 48,000, while the July figure was revised up from 44,000 to 46,000. Job growth in August was the lowest since January this year, indicating that US private-sector employment growth remains weak.

Following the release of the August ADP data, spot gold and silver rebounded in the short term, with spot gold briefly recovering to near $4,340 per ounce and spot silver rising above $64 per ounce.

[Source: TradingView]

US stock index futures subsequently strengthened, with Dow futures and S&P 500 futures rising and Nasdaq 100 futures briefly turning positive, as investors focused on the impact of weaker-than-expected employment data on Federal Reserve policy expectations.

By industry, the service sector added 48,000 jobs in August, while the goods-producing sector lost 10,000 jobs. Within services, education and health services increased by 45,000, leisure and hospitality added 16,000, and financial activities rose by 6,000; trade, transportation, and utilities decreased by 5,000, information declined by 4,000, and professional and business services dropped by 16,000.

In the goods-producing sector, construction added 12,000 jobs, manufacturing lost 17,000, and natural resources and mining fell by 5,000.

ADP Report on Employment Changes in Key Industries

• Construction: August added 12,000, July added 1,000
• Manufacturing: August lost 17,000, July added 2,000
• Trade/Transportation/Utilities: August lost 5,000, July lost 8,000
• Financial Activities: August added 6,000, July added 10,000
• Professional/Business Services: August lost 16,000, July added 9,000
• Education/Health Services: August added 45,000, July added 36,000
• Leisure/Hospitality: August added 16,000, July lost 11,000
• Information: August lost 4,000, July added 5,000

By company size, large companies (500+ employees) added 34,000 jobs in August, small companies (1 to 49 employees) added 3,000 jobs, while medium-sized companies (50 to 499 employees) saw employment remain virtually flat.

Specifically, among small companies, firms with 1 to 19 employees added 20,000 jobs, while those with 20 to 49 employees lost 17,000; among medium-sized companies, firms with 50 to 249 employees added 2,000 jobs, while those with 250 to 499 employees lost 2,000.

ADP Report Shows Base Pay Growth in Key Sectors

• Construction: August base pay up year-over-year by 4.0%
• Manufacturing: August base pay up year-over-year by 3.5%
• Trade/Transportation/Utilities: August base pay up year-over-year by 3.3%
• Financial Activities: August base pay up year-over-year by 3.5%
• Professional/Business Services: August base pay up year-over-year by 3.2%
• Education/Health Services: August base pay up year-over-year by 3.0%
• Leisure/Hospitality: August base pay up year-over-year by 2.9%
• Information: August base pay up year-over-year by 3.1%
• Natural Resources/Mining: August base pay up year-over-year by 3.3%
• Other Services: August base pay up year-over-year by 3.0%

Starting with the August report, ADP added Base Pay data while continuing to disclose Gross Pay.

In August, base pay for all private-sector employees grew 3.2% year-over-year, while gross pay grew 4.7% year-over-year. Among them, job-stayers saw base pay grow 3.0% year-over-year and gross pay grow 4.4%; job-changers saw base pay grow 4.7% and gross pay grow 7.3%.

Markets Eye August Nonfarm Payrolls Report

The market will next turn its attention to the U.S. August nonfarm payrolls report to be released on September 4. A prior Reuters survey showed that the market expects nonfarm payrolls to increase by about 58,000 in August, with an unemployment rate of 4.1%.

Overall, August ADP data showed that job growth in the U.S. private sector remained small, with clear divergence across sectors. Education and health services, leisure and hospitality, and construction added jobs, while manufacturing as well as professional and business services saw employment declines; meanwhile, data released by ADP showed that wage growth slowed slightly in August.