US ADP Employment Change: 4-week average eases to 16.75K

Hiring cooled in early October as US private employers added 16.75K jobs a week on average.
There was no change in the loss of hiring momentum.

Further weakness in US private-sector hiring emerged in early October, with weekly job additions averaging 16.75K over the four weeks ending 10 October. The figures come from the NER Pulse, the weekly companion to the ADP National Employment Report.

Compared with the previous reading of 18.50K, the modest decline points to a further slowdown in recruitment.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

How is the market responding?

Caution ahead of the FOMC remains evident among market participants as the Greenback continues its recovery on Tuesday. Measured by the US Dollar Index (DXY), it has moved back above the 102.00 mark, with the index recording its third successive daily gain.

Employment: frequently asked questions

How does employment influence currency values?

A currency’s valuation is strongly influenced by labour market conditions, which provide an important measure of an economy’s health. When employment is high, or unemployment low, consumer spending and economic growth benefit, supporting the domestic currency. A particularly tight labour market, where too few workers are available to fill vacancies, can also affect inflation and, in turn, monetary policy. With demand for workers high and labour supply limited, wages tend to rise.

Why does the pace of wage growth matter?

For policymakers, the rate of salary increases across an economy is a crucial consideration. Strong wage growth gives households more money to spend, typically pushing up consumer goods prices. Unlike more volatile inflation drivers, such as energy prices, salary increases are unlikely to be reversed. Wage growth is therefore regarded as a key contributor to underlying, persistent inflation. This is why central banks worldwide closely monitor wage data when setting monetary policy.

How important is employment to central banks?

Central banks give different weight to labour market conditions according to their objectives. For some, explicit employment-related mandates sit alongside the task of controlling inflation. For instance, the US Federal Reserve (Fed) has a dual mandate to promote maximum employment and stable prices, whereas the European Central Bank (ECB) has the sole mandate of keeping inflation under control. Whatever their mandates, however, policymakers regard labour market conditions as important because they indicate the economy’s health and have a direct connection to inflation.