BREAKING: US Labor Market Stronger Than Expected. ADP Report Surprises Ahead of Government Data

The US private sector showed data better than market expectations. The report points to resilience in the US labor market, although clear divergence between sectors is visible under the surface, which is essentially confirmed across almost the entire economy. What do the details of the data show?

• Private sector employment increased by 86k (expected +67k), matching the revised reading for September (+86k, previously +90k)
• The services sector accounted for most of the growth: +82k jobs
• The goods sector (manufacturing, construction, natural resources) added only 4k jobs
• Education and healthcare remain job growth engines, though visibly slower than before (compared to +55k previously)
• Finance as well as professional and business services continue to reduce employment
• Wage growth for job changers accelerated to 7.6% YoY, while for job stayers it remained at 4.4%

ADP data, although historically having mixed effectiveness as a predictor for the official Department of Labor report (NFP), gains significance today given the limited communication from the Fed. The gap between dynamically growing services and problems in the goods sector confirms the picture of a "K-shaped" economy recently discussed by FOMC members – strong segments pull statistics up, while interest rate-sensitive industries (construction, manufacturing) continue to face weaker demand.

However, the reaction in the currency market was minimal. EURUSD remains near daily highs around 1.1268, but this movement stems almost exclusively from yesterday's reaction to the US midterm election results, where Democrats took control of Congress, rather than from the ADP reading itself. The pair remains in a strong upward trend initiated overnight, and employment data did not bring new impulse to this movement. The market seems to be waiting for Friday's NFP report, which may verify the message coming from today's data.