The Federal Reserve faces another "supply cut"! Payroll service provider ADP stops providing private sector employment data to it
The Federal Reserve has lost access to private sector employment data provided by ADP Research, leading to an information blind spot ahead of its upcoming interest rate meeting. ADP ceased data provision on August 28, and the reasons remain unclear. Due to the government shutdown, the release of official economic data has significantly decreased, and the interruption of ADP data further weakens the Federal Reserve's real-time grasp of the labor market. The Federal Reserve faces a decision-making dilemma between a weakening labor market and persistent core inflation pressures. Powell has emphasized the importance of ADP data, calling it a complement to official data
According to the Zhitong Finance APP, as the U.S. government continues to shut down, leading to a "supply interruption" of official economic data, the Federal Reserve has also lost a key source of private employment data, creating a larger information blind spot for decision-makers ahead of the interest rate meeting.
According to informed sources, the payroll service agency ADP Research has stopped providing employment data covering about 20% of the U.S. private sector workforce to the Federal Reserve. This occurred on August 28, after Federal Reserve Governor Waller cited the data in a speech. ADP has not responded to media requests for comment, and the direct reason for its "supply interruption" is currently unclear.
Due to the government shutdown, federal statistical agencies have significantly halted the release of economic data, and the interruption of ADP data further weakens the Federal Reserve's real-time grasp of the labor market. The Federal Reserve is set to meet on October 28-29 to discuss another interest rate cut, while the current decision-making challenge lies in the fact that the labor market is clearly weakening, but core inflation pressures have not fully dissipated.
The Federal Reserve's data framework relies on official data, third-party polls, and internal models. Powell mentioned in a 2019 speech about the collaboration with ADP, stating that it provides an "independent perspective that can complement official statistics," and noted that this data can help the central bank improve real-time employment assessments.
Powell stated last week that private data "should serve as a supplement to official data," but if the government shutdown continues for too long, the Federal Reserve "will begin to miss key data," making policy judgments more challenging
