Introduction
The job market took a hit in January, with businesses creating only 107,000 new jobs, according to paycheck company ADP. This comes as a sign that hiring has slowed down since last fall, falling short of economists’ forecasted gain of 150,000.
ADP Payroll Estimate
While the ADP payroll estimate is not a precise predictor of the government’s official employment report, it does show a similar trend over time. Both reports indicate that businesses are still adding workers, though at a notably slower pace compared to the beginning of 2023.
Government Report
The government’s report, expected to be released on Friday, is projected to show the creation of 185,000 new jobs in January, including government workers. It’s important to note that ADP only tracks the private sector.
The Big Picture
Contrary to predictions, the economy has not slowed down as much as anticipated. Despite higher interest rates failing to depress the economy, the rate of inflation is actually slowing down, which may prompt the Federal Reserve to cut interest rates by the early summer.
One significant factor to consider is wages. The trajectory of wage growth will determine if it continues to taper off or reaccelerates if the economy picks up speed. This will greatly influence how much and how quickly the Federal Reserve will decide to cut rates.
Market Reaction
In light of the news, the Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) are expected to open lower in Wednesday trading.