At 20:15 Beijing time, the number of ADP jobs in the United States increased by 122,000 in July, lower than the expected 150,000, the smallest increase since January 2024. The previous value was revised from 150,000 to 155,000.

The report showed that wage growth slowed in July. Among them, the year-on-year wage growth of those who stayed in their jobs slowed to 4.8% in July, the slowest growth rate in three years; the year-on-year wage growth of those who changed jobs dropped sharply, slowing from 7.7% to 7.2%.

The agency said the lower-than-expected ADP data was consistent with signs of weakening labor demand, as the unemployment rate has been rising in recent months and the number of people applying for unemployment benefits has also been increasing.

According to CME's "Fed Watch", after the release of ADP data, the probability of the Fed staying on hold tonight is 96.9%, and the probability of a 25 basis point rate cut is 3.1%. The probability of the Fed keeping interest rates unchanged until September is 0%, the probability of a cumulative 25 basis point rate cut is 87.7%, the probability of a cumulative 50 basis point rate cut is 12.0%, and the probability of a cumulative 75 basis point rate cut is 0.3%.

After the data was released, the USD/JPY pair hit the 150 mark for the first time since March this year. The US dollar index once fell below 104 for the first time since July 18.

ADP Chief Economist Nela Richardson said the labor market is cooperating with the Federal Reserve's efforts to slow economic growth as wage growth slows. If inflation picks up, it won't be because of the labor market.

The figures suggest labor demand in the world’s largest economy may be slowing, a trend that could bolster expectations that the Federal Reserve will cut interest rates later this year. In theory, a slowing job market could ease some upward pressure on wages and, in turn, inflation.

Financial website Forexlive said that the overall weakness in the job market is mild, but it should make the Federal Reserve more confident that it is time to signal that it is time to normalize policy.

The U.S. second quarter labor cost index released later showed that the broad indicator of U.S. labor cost growth cooled more than expected in the second quarter, supporting the trend of gradual easing of inflationary pressures. The U.S. second quarter labor cost index recorded a quarterly rate of 0.9%, after the index hit its largest increase in a year in early 2024.

PGIM Chief U.S. Economist Bocelli said that due to the slowdown in cyclical hiring in the past few months, the U.S. focus has shifted from inflation to the easing of the labor market, which has enabled the Federal Reserve to start cutting interest rates in September. The Federal Reserve is expected to announce a September rate cut at its meeting tonight. Another rate cut may be made at the December meeting, and the possibility of a rate cut in November cannot be ignored. It is expected that by the end of 2025, the Federal Reserve will have cut interest rates by about 150 basis points in total.

Article forwarded from: Jinshi Data