ADP Non-Farm Employment Change Surprises

Alan Penny

5 February 2020

3 min read

  • ADP signals 291,000 jobs added in January
  • Continues “risk-on” attitude in the markets
  • US one of the global bright spots

Early during your trading on Wednesday, the ADP Non-Farm Employment Change figures came out, signaling that 291,000 jobs were added in January. This is a very strong sign for an already strong US labor market.

The report is often seen as a precursor to the official numbers coming out the United States, although it doesn’t necessarily correlate 1 to 1. In other words, it gives the overall direction of where employment might be heading.

as the number came out much better than the anticipated 157,000 jobs for January, markets have started to react accordingly

Automatic Data Processing is the largest private payroll company in the United States, so its release is considered crucial as it shows a general “30,000-foot view” of the employment markets around the country. As the number came out much better than the anticipated 157,000 jobs for January, markets have started to react accordingly.

Some of the market reactions

The euro fell towards the 1.10 level again as the US dollar strengthened. The 1.10 level has been crucial for support lately. The fact that the euro has been in a longer-term downtrend to begin with only fuels the overall move in this market that has been in effect over the last three years. The EUR/USD pair is one of the easiest ways to gauge US dollar strength or weakness.

The Dow Jones Industrial Average futures markets were already positive ahead of the announcement, but as it came out, the implied open was just shy of 300 points. The S&P 500 was implying an open 27 points higher, and the figures show that strength will continue in the equity markets. NASDAQ 100 futures also suggested a gain of roughly 99 points.

Gold markets continued to fall, looking to open near $1555. Gold has been selling off in more of a “risk-on” rally recently. There does seem to be a support level near the $1550 level, and early in the trading session, it appears the market is at least willing to sit still near that major level.

The ten-year note in the United States sold off to a rate of 1.647%, as traders reach further into the financial spectrum for gains and express risk appetite going forward.

Expect further volatility

The market should continue to be very volatile, but it does look as if the United States is going to continue to be one of the bright spots in the world.

Ultimately, this is a continuation of what has been the case for most of the last year or so, with money flowing into the United States from places such as Asia. This is especially true with the coronavirus raging in China, so at this point, it looks as if US equities, the US dollar, and dollar-denominated assets should continue to attract a certain amount of money.

Safe-haven assets are at least stable, showing that there is still a significant amount of fear out there, despite the fact that some risk appetite is returning to particular markets.

Written By
Alan Penny

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