Booming ADP Employment, Stable Unemployment Claims Set Stage For Friday's Key May Jobs Report

The American labor market continues to demonstrate its strength, with the ADP reporting Thursday a notable and better-than-expected surge in private employment in May.

Concurrently, the Department of Labor signaled a lower-than-anticipated rise in unemployment claims last week, further reinforcing healthy conditions in the job market.

These figures serve as a prelude to the highly anticipated nonfarm payroll report by the Bureau of Labor Statistics scheduled for release Friday, alongside updates on the unemployment rate and wage growth. 

May's ADP Employment Report: What You Need To Know

• Private businesses recorded an increase of 278,000 jobs in May, a slight dip from the revised figure of 291,000 in April but significantly surpassing the expected 170,000, as reported by Automatic Data Processing, Inc. ADP on Thursday.
• According to Nela Richardson, ADP's chief economist, there has been a notable decline in pay growth for job changers for the second consecutive month.
• Pay growth is slowing considerably, suggesting that wage-driven inflation may be less of a concern for the economy despite robust hiring.
• The growth in employment primarily stemmed from small and midsized companies, which added 235,000 and 140,000 jobs, respectively. In contrast, large companies reported a decline of 106,000 jobs.
• The services sector exhibited positive performance by creating 168,000 jobs, led by the leisure/hospitality sector with 208,000 jobs and trade/transportation/utilities with 32,000 jobs. Other industries experienced declines, with financial activities witnessing 35,000 layoffs.
• Within the goods-producing industry, there was an overall addition of 110,000 jobs. The natural resources/mining sector contributed 94,000 jobs, construction contributed 64,000 jobs and manufacturing reported a decrease of 48,000 jobs.

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Key Takeways From Last Week's US Unemployment Claims

• Initial jobless claims came in at 232,000 for the week ended May 27, marginally up from a revised level of 230,000 the prior week and below expectations of 235,000.
• The four-week moving average for jobless claims, which eliminates week-to-week variability, ticked down from 232,000 to 229,500. 
• Continuing jobless claims for the week ended May 20 slightly rose from a revised lower 1,789,000 to 1,795,000, below than the forecasted 1,800,000.
• Notable increases in jobless claims were reported in California, up 44,402, and in Texas, up 19,344. 

Initial Market Reactions

• Market-implied probabilities on a Fed interest rate hike in June slightly surged to 33%, after falling as low as 25% on Wednesday due to Fed officials' dovish remarks. 
• The U.S Dollar Index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, was flat for the day.
• Futures on the S&P 500 index, which is tracked by the SPDR S&P 500 ETF Trust SPY, were up 0.15% ahead of the opening bell.  
• Gold, which is tracked by SPDR Gold Trust GLD, ticked 0.1% higher.  

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