The U.S. job market suddenly hit the brakes, with the pace of hiring slowing to its lowest level in two years, far below all economists' expectations, and expectations for interest rate cuts soaring.
On Wednesday, data released by ADP Research showed that U.S. ADP employment increased by 37,000 in May, the lowest level since March 2023, significantly lower than the expected 114,000, and down from the previous value of 62,000.
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This figure is 5 standard deviations away from the expected value, marking the largest miss since August 2022.
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This sharp decline in data directly reflects a significant weakening in employers' demand for new employees. In contrast, employment growth had remained relatively stable in previous months. ADP Chief Economist Nela Richardson stated in a release on Wednesday:
<blockquote>
“After a strong start, hiring is losing momentum.”
</blockquote>
Following the data release, investors significantly raised their expectations for future interest rate cuts. Trump expressed clear dissatisfaction with the data performance, continuing to pressure Powell on social media:
<blockquote>
The ADP report is out!! “Too late, Mr.” Powell must now lower interest rates. He is unbelievable!! Europe has already cut rates nine times!
</blockquote>
<h2>U.S. Corporate Hiring Generally Weak, Wage Growth Stagnates</h2>
Data shows that most industries are in a weak state. Key sectors such as business services and education/healthcare are experiencing layoffs, while trade, transportation, and manufacturing are also reducing jobs. Only the leisure and hospitality sector and financial activities are maintaining hiring growth, but this is far from enough to offset the downturn in other industries.
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Small businesses are leading the weak trend in the labor market. <img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/18e3103e-38ba-45d8-a17b-ea672b9a62e9.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/18e3103e-38ba-45d8-a17b-ea672b9a62e9.png"/>
Goods-producing industries cut 2,000 jobs, while the service sector only added 36,000 jobs.
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Salary growth has seen little change. Employees who switched jobs experienced a salary increase of 7%, while those who stayed saw only a 4.5% increase.
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The key question facing the market now is: Is this a temporary fluctuation in the job market, or a sign of a deeper economic slowdown? Friday's non-farm data will provide the answer. The market expects non-farm employment growth to slow from the robust hiring pace of April, with the unemployment rate remaining stable.
However, the ADP data significantly fell short of expectations, casting a shadow over the upcoming employment data. If the non-farm data confirms the trend of employment weakness, the Federal Reserve may face greater pressure for policy adjustments, and concerns about an economic recession will further intensify.
<h2>Market Reaction</h2>
After the data was released, the dollar index briefly fell about 20 points, currently reported at 99.08.
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U.S. stock futures dipped briefly, with the Nasdaq 100 index futures narrowing their gains to 0.1%. The yield on the U.S. 10-year Treasury bond briefly fell, currently reported at 4.454%.
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Spot gold rose slightly, currently reported at $3348.86 per ounce.
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In May, the ADP employment number in the United States increased by 37,000, the lowest level since March 2023. This figure is 5 standard deviations away from the expected 114,000, marking the largest miss since August 2022. After the data was released, Trump called out to Powell: "Rates must be lowered now!"

- The U.S. job market has sharply slowed, with hiring at its lowest level in two years, as ADP reported only 37,000 new jobs in May, far below the expected 114,000.  
- This significant drop reflects a notable decrease in employer demand for new employees, with most industries experiencing weakness, particularly in business services and manufacturing.  
- Following the report, expectations for interest rate cuts surged, raising concerns about a potential economic slowdown, with upcoming non-farm payroll data expected to provide further insights.

The US May ADP "surprised"! Employment numbers plummeted to 37,000, with new jobs created by businesses hitting a two-year low