ADP Jobs Report Shows Bounce In Private Hiring; S&P 500 Futures Steady

• Education and health sectors led job gains with 39,000 additions, while leisure and hospitality added 24,000 jobs; manufacturers cut 5,000 positions
• Markets are pricing in just 16% odds of a Fed rate cut on Jan. 28, rising to 47% for a potential cut by March 18
• Friday's BLS jobs report is expected to show 55,000 total job gains with unemployment holding at 4.6%, though Fed Chair Powell noted BLS data may be overstating gains by 60,000 monthly

Summary: ADP Jobs Report Shows Modest December Rebound

Key Employment Data:

ADP reported private-sector employers added 41,000 jobs in December, slightly below the 47,000 consensus forecast. November's data was revised to show a loss of 29,000 jobs (from an initial -32,000). Education and health services led job gains with 39,000 positions, followed by leisure and hospitality at 24,000, while manufacturing cut 5,000 jobs.

Context and Importance:

The ADP report has gained increased relevance after Fed Chairman Jerome Powell indicated that official Bureau of Labor Statistics (BLS) data may be overstating job gains by 60,000 monthly. The upcoming Friday BLS report is expected to show 55,000 total jobs added with unemployment holding at 4.6%.

Market Implications:

S&P 500 futures remained essentially flat following the jobs data release. The index closed at a record high on Tuesday, up 0.6% and extending its 3-day gain to 1.45%.

Federal Reserve Rate Cut Outlook:

The modest employment growth appears to reduce urgency for additional Fed rate cuts. Markets are pricing in just 16% probability of a rate cut at the January 28 Fed meeting, with odds rising to 47% for a cut by the March 18 meeting.

Technical Note:

Some economists suggest ADP's seasonal adjustment methodology may have contributed to the weak November reading, potentially explaining the 101,000-job discrepancy between ADP and BLS data that month.

The data suggests a stabilizing but sluggish labor market, supporting the Fed's cautious approach to further monetary policy easing.