YieldTest - 'Solid' private payrolls report adds to continuing recovery picture

The ADP National Employment Report is a monthly report which provides an estimate of US non-farm employment in the private sector. Since publishing of the report began in 2006, its employment figures have exhibited a high correlation with official non-farm payroll figures, although a large difference can arise in any individual month.

The latest ADP report indicated private sector employment increased by 978,000 in May, more than the 700,000 which had been generally expected. April’s increase was revised down by 88,000 to 654,000.

“Regardless of the reliability of the ADP report as guide for nonfarm payrolls, the solid ADP print overnight alongside another solid ISM services print suggests the US labour market should recover at a solid pace over coming months,” said NAB currency strategist Rodrigo Catril.



US Treasury yields rose on the day. By the close of business, 2-year Treasury bond yield had inched up 1bp to 0.16% while 10-year and 30-year yields each finished 3bps higher at 1.62% and 2.30% respectively.

In terms of US Fed policy, expectations of any change in the federal funds rate over the next 12 months remained soft. Federal funds futures contracts for June 2022 implied an effective federal funds rate of 0.105%, about 5bps above the current spot rate.

Employment numbers in net terms increased across businesses of all sizes, with gains fairly evenly distributed for a third consecutive month. Firms with less than 50 employees filled a net 333,000 positions, mid-sized firms (50-499 employees) gained 338,000 positions while large businesses (500 or more employees) accounted for 308,000 additional employees.


Employment at service providers accounted for over 85% of the total net increase, or 850,000 positions. The “Leisure & Hospitality” sector was the largest single source of gains for a second consecutive month, with 440,000 additional positions. The “Education & Heath” and “Trade, Transportation & Utilities” sectors accounted for another 139,000 and 118,000 positions respectively. Total jobs among goods producers increased by a net 128,000 positions.

Prior to the ADP report, the consensus estimate of the change in May’s non-farm employment figure was 663,000. The non-farm payroll report will be released by the Bureau of Labor Statistics this coming Friday night (AEST), 4 June.

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