The key indices of the US stock market - Dow Jones, NASDAQ, and S&P 500 - ended Thursday with a new increase. As you can see, the weakness of the ADP report, which is a kind of analog of the Nonfarm Payrolls report, did not worsen the mood of traders. It should be noted right away that the ADP report rarely provokes a reaction from the markets. Traders and investors still prefer to react to the non-farm report, and the ADP report is considered secondary. Yesterday, it became known that the number of new jobs in the US private sector increased by 128 thousand, although forecasts predicted an increase of 205-300 thousand. And here again, one important fact should be highlighted: ADP and Payrolls reports rarely coincide either in their values, in deviations from the forecast, or even in trends. For example: on Thursday, the ADP report may show an increase of 100K, and on Friday, Nonfarm record an increase of 500K. In this case, the first report will be considered a failure, and the second one will be excellent. Thus, the main conclusion is: that you need to wait for a Non-farm report, and ADP is secondary data.
Let's then proceed to the study of the Nonfarm report, which may affect the US stock market today. According to experts' forecasts, the number of new jobs outside the agricultural sector will amount to 320-325 thousand in May. It should also be remembered here that the normal value of Nonfarm is an increase of 200 thousand. These are the values we often saw in pre-pandemic times. Then the US economy collapsed (as did Nonfarms), then began to recover quickly. And judging by the fact that in recent years the average value of Non-farms was not 200K, but 400-500K, then the labor market is still in the recovery or acceleration stage. We want to say that if today the value of the indicator turns out to be below 300 thousand, it will not mean that "Nonfarm failed". The market may react negatively to such figures, but the indicator shows a good increase almost every month, more than partially provoking inflation.
Yes, paradoxical as it may sound, but minimum unemployment and maximum employment levels are now playing in favor of inflation growth. The lower the unemployment, the greater the labor shortage in some areas or some professions. As a rule, we are talking about intellectual professions and professions with salaries above the average level. Employers, faced with a shortage of employees, are forced to raise salaries for new candidates to lure them away from other companies, which leads to an increase in wages and, as a result, an increase in prices, because demand in many sectors of the economy continues to be higher than supply. Thus, today, the US stock indices may even continue to grow at almost any value of NonFarm Payrolls, but the global downward correction is not yet complete.
