Expectations for a Rate Cut Rise Ahead of December FOMC Meeting
In November, a private research firm reported that employment in the United States declined more than expected.
On December 3 (local time), Automatic Data Processing (ADP), a U.S. employment information company, announced that private sector employment in the United States decreased by 32,000 in November compared to the previous month. This marks the largest decline in two years and eight months since March 2023, when employment fell by 53,000. Experts surveyed by Dow Jones had anticipated an increase of 40,000 jobs in November.
While most industries experienced weaker employment, the declines were particularly pronounced in professional and business services (26,000 jobs lost), information (20,000 jobs lost), and manufacturing (18,000 jobs lost). Notably, small businesses with fewer than 50 employees led the decline, shedding 120,000 jobs in November. In contrast, businesses with 50 or more employees saw an increase in employment compared to the previous month. Nela Richardson, Chief Economist at ADP, analyzed, "Recent employment has shown instability as employers respond to more cautious consumers and an uncertain macroeconomic environment," adding, "The slowdown in November was broad-based, with small businesses leading the decline."
The ADP private sector employment indicator is based on data collected by a private information provider and may differ from the official nonfarm payroll figures compiled by the U.S. government. Due to the effects of the federal government shutdown (temporary suspension of operations), the official government employment report for October was not released, and the November employment report is also scheduled to be published later than originally planned. As a result, Wall Street has been closely monitoring the ADP private sector data to gauge labor market trends. The U.S. Department of Labor's November employment report, originally scheduled for release on December 5, will now be released on December 16, after the Federal Reserve's Federal Open Market Committee (FOMC) meeting, due to delays in data collection during the shutdown period.
The Federal Reserve will hold the December FOMC meeting on the 9th and 10th to decide whether to lower the benchmark interest rate. Fed officials are divided, with some arguing for a 0.25 percentage point rate cut in light of weakening employment, while others believe rates should be held steady due to inflation risks.
With the November ADP employment indicator coming in unexpectedly weak, the market anticipated that the Fed would cut rates at the December FOMC meeting. According to FedWatch from the Chicago Mercantile Exchange (CME), the interest rate futures market reflected an 89% probability of a 0.25 percentage point rate cut by the Fed at the December FOMC immediately after the release of the ADP employment data.
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