ADP Private Employment Halved in August
Weekly Jobless Claims Hit Highest Since June
Rate Cut Expectations Rise... 44% Chance of Three Cuts This Year
All Eyes on August Jobs Report Due on the 5th
The three major indices of the New York Stock Exchange rose on September 4 (local time). As concerns about a slowdown in the labor market have grown and indicators showing weak employment have been released for two consecutive days, investors responded optimistically, raising expectations for an interest rate cut.
As of 11:08 a.m. on this day at the New York Stock Exchange, the blue-chip Dow Jones Industrial Average was up 122.99 points (0.27%) from the previous trading day, standing at 45,394.22. The large-cap S&P 500 Index rose 20.07 points (0.31%) to 6,468.33, while the tech-heavy Nasdaq Index climbed 59.419 points (0.28%) to 21,557.146.
The catalyst for the stock market's rise was a series of weak employment indicators announced earlier in the morning. ADP, a U.S. private labor market research firm, reported that private sector payrolls increased by 54,000 in August. This figure not only fell short of the Dow Jones estimate of 75,000, but also was about half of the previous month's 106,000. In addition, according to the U.S. Department of Labor, the number of new unemployment claims for the week of August 24-30 was 237,000, an increase of 8,000 from the previous week's 229,000. This is the highest level since June and also exceeded Bloomberg's estimate of 230,000.
There were also indicators showing that companies are increasing layoffs and becoming more cautious about hiring. According to Challenger, Gray & Christmas, a job placement firm, the number of layoffs in August was 85,979, up 39% from the previous month. This is the highest August figure since the COVID-19 pandemic peaked in 2020. So far this year, companies have cut 892,362 jobs, also the highest since 2020. On the other hand, the number of new hires announced by companies in August was only 1,494, marking the lowest since 2009.
Previously, the U.S. Department of Labor reported that the number of job openings in July was 7,181,000, the lowest in ten months, and signals of a cooling labor market have continued for several days. The market believes that the aggressive tariff policy of the Donald Trump administration is now having a significant impact on the overall economy.
Expectations for an interest rate cut have grown even further. According to the CME FedWatch Tool, the federal funds futures market reflected a 97.6% probability that the U.S. Federal Reserve will cut its current interest rate of 4.25-4.5% by 0.25 percentage points in September. This is up from 86.7% a week ago. In addition, the probability that the Fed will cut rates at all three remaining meetings this year, resulting in a total reduction of 0.75 percentage points within the year, also rose to 44%, up from 37% a week ago.
Chris Larkin, Managing Director at Morgan Stanley E*TRADE, said, "In the short term, the market can accept this data as increasing the likelihood of a Fed rate cut," adding, "However, if the numbers deteriorate too much, concerns about the soundness of the economy could grow."
Wall Street's attention is now focused on the August employment report, which will be released the following day and is considered the most accurate indicator of labor market trends. The market expects that nonfarm payrolls will increase by only 75,000 in August, up slightly from July's 73,000. If this happens, job growth will remain below 100,000 for four consecutive months, marking the weakest trend since the COVID-19 pandemic peaked in 2020. The unemployment rate is also expected to rise slightly from 4.2% in July to 4.3% in August.
U.S. Treasury yields are steady. The 10-year Treasury yield, a global benchmark, is at 4.20%, and the 2-year yield, which is sensitive to monetary policy, is at 3.61%, both unchanged from the previous day. The 30-year Treasury yield, which surged earlier this week following a court ruling on reciprocal tariffs and the possibility of tariff refunds under the Trump administration, is also steady at 4.89%.
By stock, Salesforce plunged 5.87% after announcing a disappointing quarterly revenue outlook. Tesla, which released its robotaxi application (hereafter referred to as "app"), fell 0.09%, showing a slight decline. Broadcom rose 0.77%, and Microsoft was up 0.32%. Alphabet, which jumped over 9% the previous day after avoiding the sale of its Chrome browser, was down 1.34%.
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