Jul 6, 2023 - Economy

ADP redesigned its jobs report — and it's moving markets

Data: Tradeweb; Chart: Axios Visuals

Last August marked the arrival of a new monthly jobs report that had great potential. On Thursday, that potential was proved, as the ADP report sent 10-year Treasury yields spiking above 4%, while stocks ended the day down.

Why it matters: The big question surrounding the ADP report has been whether traders would take it seriously as an independent dataset. That question has now been decisively answered.

The big picture: Historically, the ADP report was aimed at traders, rather than economists. It was a black box, designed to mimic the Bureau of Labor Statistics' monthly jobs report as closely as possible, and which implicitly encouraged traders to try to front-run the BLS report.

  • The new ADP report, designed with input from Stanford researchers, is meant to be a whole parallel data trove, capable of moving markets and influencing policymakers on its own merits.
  • Rather than being based on polling data, like the BLS report, the ADP report is based on actual payroll transactions at companies employing more than 25 million U.S. workers.

Be smart: The latest Fed minutes explicitly mention ADP as an important source of employment data.

By the numbers: The ADP report showed 497,000 private-sector jobs created in June, with a whopping 232,000 jobs created in the leisure and hospitality industry alone.

  • That kind of labor market strength suggests that the Fed may need to keep interest rates higher for longer than markets previously anticipated.

The bottom line: The BLS still releases the most important monthly jobs report. But it's no longer the only one that matters.

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