Insights 
VT 
ADP’s latest survey for May shows a decrease in employment growth, with prior figures at +62K. Goods-producing jobs dropped by 2K compared to a previous increase of +26K, while service-providing jobs rose by 36K, marginally up from +34K.
Wage growth remains stable, with job stayers seeing a 4.5% increase, consistent with the previous measure. Those changing jobs experienced a slight rise in pay growth from 6.9% to 7.0%.
Employment Figures Analysis
April’s employment figures were the poorest since July, and May’s results have worsened to levels not seen since March 2023. Despite decreasing momentum in hiring, pay growth stayed strong for both job-stayers and job-changers in May.
The US dollar experienced a decline following these results, with the USD/JPY rate falling from 144.25 to 143.87. This softness is observed across other currencies as well.
The ADP data paints a picture of a labour market that’s now entering a phase of reduced pace rather than outright weakness. A clearer drop in hiring, especially within the goods-producing sector, has emerged. A fall of 2,000 jobs there, especially after a reasonable rise the month before, isn’t something that tends to be brushed aside. Meanwhile, service-providing job growth has crept higher, but just barely. It suggests that forward pressure in employment isn’t uniform. We’re seeing shifts that hint at early signs of caution by employers, likely reacting to broader macroeconomic signals and financial conditions.
Wage growth, however, continues to defy the slowdown in hiring. Pay for those staying in their roles has remained stuck at 4.5% year-on-year growth. It’s a pace that, while not extreme, shows consistency. On the other hand, those moving between positions have managed to gain slight additional earning power — climbing from 6.9% to 7.0%. This movement, although small in isolation, reflects that new hires are still commanding relatively strong bargaining power. That’s often the last part of the cycle to bend when jobs start stalling out, so it may not hold up indefinitely.
Market Response and Implications
What’s most noticeable in these developments is how markets are responding in direct terms. The immediate reaction in the US dollar, particularly versus the yen, was lower — a drop from 144.25 to 143.87 isn’t immense, but for tactical positioning, it’s enough to reset some expectations. The softening dollar has also surfaced in other pairs, suggesting that the market is seeing this employment data as another piece of the puzzle pointing toward easing labour strength.
From a trading perspective, there are specifics to take from this. When hiring data shows repeated softness, particularly in traditionally resilient areas like services, it tends to trigger re-evaluations of central bank actions. If wage pressures remain, the policy message becomes more complex. There’s a narrowing path forward — the jobs market is losing steam, but inflation risks haven’t yet clearly faded.
We’ve noted that markets are responding not only to the overall job numbers but also to composition — splits between goods and services and the apparent stickiness in wages. Rate-sensitive instruments, especially those tied to inflation expectations or interest rate cuts, now have a tougher setup. The mix of slower employment gains and stable or slightly advancing wages often causes re-pricing in short-end yields, which then finds its way through rate and currency products.
Given this data, it would be prudent to recheck correlation models involving the dollar, Fed rate expectations, and labour metrics in high-frequency setups. Volatility in near-term contracts could rise as incoming data continues showing divergence between employment levels and hourly compensation. Recent developments require keeping a tighter focus on how equities and bonds interpret the wage data, in particular.
Remember that acceleration in wages while hiring slows presents a specific kind of stress — one that central banks do not take lightly. Decisions over the coming weeks will likely hinge not on jobs created alone but on how aggregate incomes evolve and whether the slowdown penetrates the broader economy. Labour tightness measured by job-switching activity might not last if broader hiring continues to retreat.
Adjust positions accordingly. The compressed market reaction to the ADP data leaves room for subsequent moves, particularly if follow-up readings on nonfarm payrolls or inflation show similar discrepancies between employment strength and income velocity. For now, returns linked closely to currency differentials and policy path scenarios will need to be recalibrated more frequently. Watch not just the headline numbers, but how wage stickiness bends or holds in the next two reports.
