Important signal makes the market hold its breath waiting for the Fed to lower interest rates?

(Dan Tri) - The new employment figures released by ADP show a picture completely opposite to analysts' expectations. This increases pressure on the Fed in its decision to lower interest rates.

The US labor market continued to show signs of weakness in November as the private sector cut 32,000 jobs, with small businesses being hit hardest, according to a report by payroll processor ADP.

The figures raised concerns about the state of employment in the country as the result was much worse than expected. The sharp decline in employment was in stark contrast to economists ' expectations of an increase of 4,000 jobs.

Specifically, businesses with 50 or more employees actually increased their workforce by 90,000. In contrast, establishments with fewer than 50 employees lost 120,000 jobs, with companies with 20-49 employees cutting 74,000 positions. Observers stressed that this was the largest decline since March 2023.

Education and health services led hiring with 33,000 new jobs, followed by leisure and hospitality with 13,000 positions.

Professional and business services recorded the largest decline, with 26,000 jobs lost. Other industries with significant cuts included information services, manufacturing, financial activities and construction.

Wage growth also slowed, with workers staying in their current jobs seeing a 4.4% year-on-year increase, down 0.1 percentage point from October.

“Hiring has been volatile recently as employers grapple with cautious consumers and macroeconomic uncertainty,” Nela Richardson, chief economist at ADP, said in the report. “While the slowdown was broad-based in November, the main driver was a slowdown in activity by small businesses.”

Fed Chairman Jerome Powell (Photo: Getty).

The ADP data just released has increased the pressure on the US Federal Reserve (Fed) to continue cutting interest rates. This year, the Fed has cut interest rates twice to cope with the risk of slowing growth. With the disappointing November jobs report, many experts predict that the Fed will make a third cut at the upcoming meeting.

“The ADP data reinforces the Fed’s dovish view that it is more important to protect the weakening labor market than to continue worrying about inflation,” Chris Zaccarelli, chief investment officer at Northlight Asset Management, said in a report.

Short-term U.S. government bond yields fell slightly after the report was released, reflecting market expectations of a Fed easing. The yield on the two-year Treasury note fell 0.04 percentage point to 3.47 percent.

According to Mr. Abiel Reinhart, an expert at JPMorgan, the ADP report will make the Fed more concerned about the employment outlook before the December policy meeting. With the current level of weakness, especially in the small business sector, the Fed may be forced to act faster to avoid a widespread labor market decline.

Fed policymakers have been divided in recent weeks, with some arguing that rate cuts are needed to stave off a labor market crisis, while others worry that further cuts could push up inflation, which is still well above the Fed’s 2% target.

Source: https://dantri.com.vn/kinh-doanh/tin-hieu-quan-trong-khien-thi-truong-nin-tho-cho-fed-ha-lai-suat-20251204122627851.htm