Payroll processor ADP's monthly jobs report showed that net hiring in May was the weakest in over two years, prompting President Donald Trump to lay into Federal Reserve Chairman Jerome Powell in a Truth Social post. The S&P 500 traded slightly higher in Wednesday morning stock market action as Fed rate-cut odds rose.
However, markets still don't expect an easing until the September meeting amid forecasts of higher inflation fueled by Trump tariffs.
Separately, the Institute for Supply Management's service-sector index unexpectedly slumped to an 11-month low and pointed to a very slight contraction in business.
ADP Jobs Report
ADP reported a gain of 37,000 private sector jobs in May, the weakest since a negative reading for March 2023. Economists expected 110,000 net new jobs. The gain in April's jobs report was trimmed to 60,000 from 62,000.
ADP showed that firms with under 50 workers cut 13,000 jobs, while large establishments with at least 500 workers cut 3,000. Midsize businesses added 49,000.
Economists don't view ADP as a reliable predictor of the official Bureau of Labor Statistics monthly jobs report, which will be out Friday at 8:30 a.m. ET. However, a number of signs suggest hiring and wage gains have continued to soften.
Trump Skewers Fed Chief Powell
Minutes after the ADP report, Trump reiterated his call for the Fed's Powell to cut interest rates.
"ADP NUMBER OUT!!! 'Too Late' Powell must now LOWER THE RATE," Trump wrote on Truth Social.
"He is unbelievable," Trump added.
ISM Services
The ISM services index slumped to 49.9 from 51.6, dipping below the 50 neutral level. Forward-looking measures dragged the index down, with current business activity falling to 50 from April's second reading of 53.7.
The new orders index slid to 46.4 from 52.3, the first contraction since June 2024.
BLS Jobs Report Forecasts
Wall Street expects Friday's jobs report to show 129,000 new jobs, including 123,000 in the private sector, according to the Econoday consensus forecast. The unemployment rate is seen holding at 4.2%, as 12-month average hourly wage growth ticks down to 3.7% from 3.8%.
The April BLS jobs report showed solid hiring, with 177,000 new jobs despite the launch of reciprocal and auto tariffs on April 2. Yet due to the BLS methodology, which tallies employment based on the number of workers on payrolls during the mid-month pay period, any impact from tariffs announced in April would likely show up in the May report.
Fed Rate-Cut Odds
After the ADP jobs report, markets are pricing in 30% odds of a rate cut by the July 30 Fed meeting, up from 24% on Tuesday, according to the CME Group FedWatch tool. Odds that the Fed will cut its key rate by at least 50 basis points this year rose to 78% from 69%.
S&P 500
The S&P 500 is up 0.2% on Wednesday morning. That follows Tuesday's 0.6% gain, which left the S&P 500 just 2.8% below its Feb. 19 all-time closing high.
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