ADP and JOLTS Paint a Picture of a Cool Labor Market

ADP and JOLTS Paint a Picture of A Cool Labor Market

• ADP data showed business added 98,000 jobs in June.

• JOLTS figures showed the number of workers remains equal to available jobs.

• These numbers point to unchanged monetary policy.

The labor market is stabilizing, but it’s doing it in a lower gear…

Earlier this week, I laid out how I envision the labor market taking shape. I walked through the forward‑looking indicators I track to handicap this week’s payroll report. Every one of them pointed to the same conclusion: June delivered a solid rebound, but likely stayed below its long‑term trend.

That’s why I expect the U.S. Bureau of Labor Statistics (“BLS”) payroll report at week’s end to reinforce that message. Even if it prints near Wall Street’s 114,000‑job estimate, that’s still far below the typical June gain of 254,000 since 2000. It would also rank among the softer June readings since the 2008–09 financial crisis.

June is usually one of the stronger months for job seekers. Yet this week’s updates from both the BLS and payroll processor ADP confirmed the cooling trend. Job openings held steady, hiring remained weak, and the broader tone stayed subdued. That backdrop strengthens the case for the Federal Reserve to remain on hold, and underpins the ongoing rally in the S&P 500 Index.

But don’t take my word for it, let’s look at what the data’s telling us…

The BLS Job Openings and Labor Turnover Survey (“JOLTS”) data for May showed the number of available employment opportunities held steady at 7.6 million. That’s a drop of about 4.7 million from the March 2022 peak…

The more telling metric, though, is how openings stack up against the number of unemployed workers:

• By looking at the ratio, we get a sense of whether the job market is tightening or loosening.

• Tightening means employees are harder to find, driving up wages.

• Loosening means more people are seeking work, keeping a lid on pay.

• June has tended to see an acceleration throughout the last decade.

In May, about 7.3 million people were unemployed. In other words, there was roughly 1 job opening per job seeker. That’s below the five‑year average of 1.3. The ratio has hovered around this level for two years and now sits near pre‑COVID norms…

Employee turnover is also slowing. The quits rate held at 1.9%, its lowest level outside the pandemic period…

ADP’s June hiring data told a similar story. The firm estimates companies added 98,000 workers last month.

• That was down from the gain of 122,000 in May.

• It’s well below the typical June gain of 216,000 since 2011.

• It marks the 13th consecutive month of below-average hiring.

These signals matter because they shape how the Federal Reserve responds. Policymakers, including former Chair Jerome Powell, have argued that last year’s patience on rate cuts gives them room to ride out the current inflation bump. They’re growing restless, but still willing to wait and see whether the recent jump in oil prices proves temporary. And if the U.S. and Iran can finalize a deal, crude could easily drift back toward pre‑conflict levels.

Bottom line: if the June nonfarm payroll report aligns with the trends already in motion, Wall Street will likely gain confidence that rates stay unchanged for now, with the potential for a cut in mid‑2027. Lower rates next year would ease borrowing costs, free up cash flow, and support economic growth. All of these factors should continue to underpin a steady, long‑duration rally in the S&P 500.

Five Stories Moving the Market:

Federal Reserve Chairman Kevin Warsh reiterated his preference for the U.S. central bank to scale back its bond portfolio, while highlighting that any such step will only be made after extensive public preparation; Wall Street strategists broadly doubt the central bank will be able to meaningfully shrink the balance sheet - Bloomberg. (Why you should care – Warsh suggested it could take some time before the central bank begins considering a reduction in the size of the balance sheet)

Federal Reserve Chairman Kevin Warsh said he will stick firmly to the U.S. central bank's 2% inflation target and "disappoint" anyone who expects loose monetary policy despite ​President Donald Trump's call for interest rate cuts – Reuters. (Why you should care – Warsh said he will not give forward guidance on either the interest rate or economic outlook)

Cooling energy prices helped push eurozone inflation lower in June; inflation in the 21-nation currency area fell to 2.8% from 3.2% in June, the first decline since January, according to the European Union’s statistics agency Eurostat – WSJ. (Why you should care – cooling inflation growth eases pressure on the ECB to raise interest rates even more)

Apple is in negotiations to purchase chips from two Chinese semiconductor makers on a Pentagon blacklist to help reduce the impact of a global memory shortage that’s forced the company to raise prices across its product line – Bloomberg. (Why you should care – the company is seeking to use these chips to lower the cost of products it sells in China)

The White House declined to extend the U.S.-Mexico-Canada Agreement, starting a decade-long clock to wind down the trade deal as it seeks changes to try ‌to reshore manufacturing jobs and reduce U.S. trade deficits with its North American neighbors – Reuters. (Why you should care – the current deal will expire in 10 years unless Mexico and Canada accept the changes)

Economic Calendar:

Switzerland – CPI for June (2:30 a.m.)

U.K. – BOE Credit Conditions Survey (4:30 a.m.)

U.S. – Nonfarm, Manufacturing, Private Payrolls for June (8:30 a.m.)

U.S. – Average Hourly Earnings MoM for June (8:30 a.m.)

U.S. – Unemployment Rate for June (8:30 a.m.)

U.S. - Initial Jobless Claims (8:30 a.m.)

U.S. - Continuing Claims (8:30 a.m.)

U.S. – Factory Orders for May (10 a.m.)

BoE’s Mann (Board Member) Speaks (11:45 a.m.)

U.S. – U.S. Baker Hughes Total Rig Count (1 p.m.)

U.S. – Total Vehicle Sales for June (2 p.m.)

U.S. – Fed’s Balance Sheet (4:30 p.m.)

U.S. – Reserve Balances with Federal Reserve Banks (4:30 p.m.)

Japan – Au Jibun Bank Japan Manufacturing, Services, Composite PMI Final for June (8:30 p.m.)

China – Caixin China Services PMI for June (9:45 p.m.)