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ADP Private Payrolls Rebound, Supporting Taper Expectations

by Adam Corbett | October 6, 2021

What happened: According to ADP private payroll numbers, released this morning, 568,000 individuals found work in the month of September as businesses disregarded ongoing virus and economic uncertainty fears to hire at a brisk pace. This followed a revised increase of 340,000 in August.

When you pop the hood: It’s positive for the economy to have 466,000 of these roles generated in the services sector. As the subsector hit hardest during the coronavirus pandemic, the en masse return of workers – particularly in the leisure and hospitality industry – provides evidence of a gradual return to normality in the labour market.

The release had a muted impact on currency markets: The 425,000-job headline was well above market expectations, but ADP numbers are not well correlated with non-farm payrolls. The official report will be released Friday and estimates currently suggest that 460,000 jobs will be added.

But implications for Fed policy are clear: September’s private employment increase was the biggest in three months and portends good things for the wider economy. Consumer spending – heavily influenced by employment levels – contributes approximately 70 percent of overall activity. If today’s rebound is matched on Friday, market consensus on a tapering announcement at the November Federal Reserve meeting will firm up.

In other news: European breakevens soared and 10-year Treasury yields rose as high as 1.57 percent earlier this morning, as rising energy prices threatened to force central banks into a more aggressive-than-expected tightening cycle.

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