ADP beats expectations, US dollar jumps on the news

on Jan 5, 2023

Every first week of a trading month has special meaning for financial market participants. First, it is the time when the US jobs data for the previous month is released.

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Because the Federal Reserve of the United States has a mandate that involves job creation too, the state of the job market is an indicator of what the Fed will do with the interest rates.

Two releases are worth monitoring in such a week. One is the ADP Employment Report, also called the private payrolls. The other is the NFP or Non-Farm Payrolls report.

Typically, the ADP is released two days ahead of the NFP. More precisely, on a Wednesday.

Only in this case, because this week is the first one of the trading year, holidays have impacted the regular calendar. As such, the ADP came out today, one day ahead of the all-important NFP report.

Why all-important NFP?

Because out of the two, the NFP report has more weight for investors. However, the private payrolls, or the ADP, offer a clue about the NFP; hence it is able to move markets ahead of the NFP report.

Private employers added more jobs in December than expected

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The market expectation for December was that the private sector would have added 152k new jobs in December, but the actual number came way higher at 235k.

It means that the job market remains strong and resilient, with hiring remaining strong across small and medium businesses. Large businesses, though, lost 151k jobs in December. 

Annual pay rose by 7.3% YoY

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An interesting point that the ADP report makes is that the annual pay for workers in the private sector rose by 7.3%. In light of the Fed’s efforts to fight inflation, it looks like private employers caught up with the inflation rate to retain the workforce.

Unsurprisingly, the US dollar reacted to the ADP report and moved higher. It gained a little over 0.3% against the EUR, 0.5% against the AUD, and 0.5% against NZD, to name a few.


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