Private sector employment saw a strong gain according to this morning’s Automatic Data Processing (ADP) data. Indeed, firms created a net of just 4,750 additional jobs per week on average over the four-week period ending November 15. This growth is indicative of a continued positive trend in the labor market and adds to an encouraging economic picture. The report came out on Tuesday. This timing leads right into the next Federal Open Market Committee (FOMC) meeting, coming up on Wednesday.
The ADP report gives a good picture of the resilience of the private sector, picking up a solid and steady beat of new jobs, continue to surface. The inclusion of 4,750 new jobs each week provides evidence of a generally hot labor market, an essential ingredient for lasting economic expansion. Analysts are particularly watching these numbers, as they can be a great leading indicator of overall economic direction and consumer confidence.
US Dollar Remains Stable
The strong employment data has resulted in a relatively muted reaction from the US Dollar (USD). It is trading just a tad above the 99.00 area as I write. The US Dollar Index (DXY), which measures the value of the USD against a basket of foreign currencies, reflects this stability. The dollar holds its ground as market players prepare for Wednesday’s FOMC meeting. Everyone expects it to have a seismic effect on monetary policy and the path of interest rates.
The USD is in a minor position consolidation as of writing. On Wednesday, markets continued to look ahead, looking for more guidance from the Federal Reserve. Investors are particularly attentive to how any potential changes in monetary policy could affect currency valuations and overall economic conditions.
Anticipation Ahead of FOMC Meeting
Topping that list is the FOMC event set for Wednesday, which has captured the imagination of economists and investors of all stripes. As the committee meets to discuss monetary policy, analysts expect that the employment data released by ADP could influence their decisions regarding interest rates. Job growth stays strong, raising confidence in Federal Reserve Board monetary policy. This gloomy financial backdrop will force them to stick with or shift their hawkish baseline stance on monetary policy.
For this reason, investors are particularly sensitive to the prospect that any announced changes by the FOMC might set off sharp market reactions. The combination of stable employment figures and an important monetary policy meeting provides a critical context for understanding potential shifts in economic dynamics.