The new ADP employment report, out Wednesday, paints a very different picture of the United States labor market. August’s labor figures were dismal, missing expectations by a wide margin and illustrating a dangerous trend. This has led economists to change their forecast and disclose a dire portrait of today’s economic climate. As the year comes to a close, the probability of interest rate cuts has jumped to 91%. That’s a huge increase from 77% the day before the ADP report and a nearly doubling from 40% a month ago.
Based on ADP’s findings, it’s clearly still a dark time with a very somber labor market. The agency noted that June marked a bottoming out for the labor market so far this year. Given below is our analysis of why growth came to a standstill in that month. While there was slight growth following June, the overall impact of the recent employment trends raises concerns about future economic stability.
The August figures were particularly alarming. Originally, the report had reported a net gain of 54,000 jobs. It has now been revised down to a loss of 3,000 jobs. That’s a significant shortfall from the expected growth of 50,000 jobs. The real thing has been a complete bust compared to what we hoped for. Today’s downward revision is another reminder about how much volatility still exists in this labor market.
Adding to the uncertainty surrounding employment statistics is the looming possibility of a US government shutdown, which could delay the official release of labor figures scheduled for Friday. This looming shutdown is a reminder of how tenuous the current economic backdrop is and what that could mean for the reporting and analysis to come.
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Analysts are already trying to read the tea leaves of what the ADP report means. Its signs that we have to be watching the labor market more intently. Expectations for job growth have tanked. This adjustment, together with the expectation of additional interest rate reductions, is an important signal to policymakers and investors. The moment is urgent as businesses and Americans face a growing array of risks in our rapidly changing economic environment.