Labor Market Is Cooling: ADP Job Growth Misses Expectations. Here's How Fed Rate Bets And Markets Are Reacting

The market got another hint of labor market weakness in the United States on Wednesday, as Automatic Data Processing, Inc. (ADP) reported 145,000 jobs added by private companies in March 2023, down from 261,000 in February and significantly below forecasts of 200,000.

According to ADP Chief Economist Nela Richardson, "March payroll data is one of several signals that the economy is slowing. Employers are pulling back from a year of strong hiring and pay growth, after a three-month plateau, is inching down."

Read more: Recession Playbook In Action: Cooling Labor Market Triggers Rally In Treasuries, Gold; Stocks Decline

Financial, Business Services And Manufacturing Industries Cut Jobs In March

Mid-sized businesses with 250 to 499 employees slashed 42,000 jobs in March, while large businesses with more than 500 people added just 10,000 employees.

Among different industries, financial activities had the greatest decline, with 51,000 layoffs, followed by professional and business services, with 46,000 layoffs, and manufacturing firms shed 30,000 employees in February. Meanwhile, the leisure and hospitality sectors added roughly 100,000 jobs.

Market Reactions: A Fed On Hold In May Is Now More Likely Than Not

Investors have reduced their expectations for a Fed rate hike next month and now give a 60% probability to a rate hold, according to the latest CME Group FedWatch. 

Source: CME Group

U.S. Treasury yields further dropped, with the yield on the 10-year benchmark falling to 3.32%, only a few basis points higher than its 6-month lows. 

Gold continued to kick higher to $2,030/oz, eyeing its all-time highs. 

U.S. equity futures inched lower, with the S&P 500 index down 0.3% to 4,100 points in the pre-market. The SPDR S&P 500 ETF Trust SPY closed at $408.7 in the previous session, down 0.6%. 

WTI crude marginally eased 0.7% on the day, but held above the $80 a barrel mark, indicating that OPEC+ supply cuts continue to have a stronger impact than early signals of a possible demand slowdown.  

Now Read: Jim Cramer Says This Company Is 'The Secret' To Winning The Russia-Ukraine War, Warns Putin About WWII 'Replay' 

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