• ADP employment change falls to lowest level since Oct ’13
  • However, print of 135k inline with consensus forecast however
  • USD moves of its lows following the release

The rate of pace of growth in the US labour market slowed markedly in September according to the latest ADP release. Whilst the indicator still rose, the number of jobs added was the lowest since October 2013. An employment change reading of 135k was a substantial drop on the 237k seen previously but the miss hasn’t come as too much of a shock with the data coming in close to consensus forecasts. 

The consensus forecast was so much lower due to the impact of the recent hurricanes on the US, with Harvey and Irma causing substantial damage. The fallout from the storms can be seen in lower employment readings with several Fed officials also warning that it could likely have an adverse impact on economic growth towards the end of the year.   

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 The large drop in ADP could be seen as indicating a greater chance that there is a low NFP number this Friday. Source: XTB Macrobond

Whilst the ADP release hasn’t traditionally caused a big impact on the markets, the NFP has, and this Friday’s number may now also exhibit a sizable drop. It is worth noting however that this already reflected to some extent in the consensus forecast for NF with a print of 82k expected. Therefore a substantial drop on the prior reading of 156k is not necessarily that damaging for the buck. As we’ve seen today, the US dollar has actually made some small gains following the ADP release, moving off its daily lows. 

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 The USD has gained slightly in the minutes after the ADP release despite it dropping sharply. The market was already lower due to rumours surrounding Powell as the next Fed chair. Source: xStation

The US dollar hit a 7-week high during Tuesday’s session but has been dropping today ahead of the release in part due to speculation that Jerome Powell may be the next Fed chair. Interest surrounding the next head of the US central bank has been gathering in recent sessions with talk last week that Kevin Warsh was the front runner causing a move higher in the greenback. Powell is seen as more dovish than Warsh and therefore his appointment would likely be deemed not as supportive of USD strength going forward.