ADP Report: U.S. Job Growth Slows Sharply To 37K In May As Labor Market Cools

Summary:

U.S. private employers added just 37,000 jobs in May, marking the weakest monthly gain since March 2023, according to the latest ADP National Employment Report. This slowdown adds to growing evidence that the labor market may be losing steam after a strong start to the year. The deceleration in job growth could influence expectations for Federal Reserve policy, especially with inflation still sticky.

Key Points:

● U.S. private employers added only 37,000 jobs in May, the slowest pace since March 2023, signaling a cooling labor market.

● Leisure and hospitality led gains with 38,000 jobs, while professional services and healthcare sectors posted sharp losses.

● Pay for job-changers rose 7%, while job-stayers saw 4.5% growth—steady wage inflation despite weaker hiring trends.

Job Creation Weakens: Is Labor Market Cooling Off?

Sector Breakdown: Leisure and Finance Strong, Professional Services Lag

The service-providing sector contributed 36,000 new positions, with leisure and hospitality adding a robust 38,000 jobs. Financial activities also saw solid hiring, gaining 20,000 jobs. However, these gains were offset by notable losses in professional and business services (-17,000) and education and health services (-13,000). In the goods-producing sector, construction was a rare bright spot, adding 6,000 jobs, while manufacturing and mining saw declines.

Regional Divergence: West Rebounds, Northeast Contracts

Geographic trends showed uneven performance. The West added 37,000 jobs, driven by a sharp 35,000-job increase in the Mountain region. The Midwest posted a modest gain of 20,000, while the South lost 5,000 positions. The Northeast saw the most significant contraction, shedding 19,000 jobs, primarily from a 16,000-job loss in New England.

Wage Growth Steady: Pay for Job-Changers Remains Elevated

Despite weaker hiring, wage growth remained stable. Pay for job-stayers rose 4.5% year-over-year, while job-changers saw a stronger 7% increase. The financial activities sector led with a 5.2% median pay increase for job-stayers. Pay growth was notably weaker in small firms (2.6% for those with under 20 employees), while medium and large firms posted stronger wage gains, closer to 4.8%.

Firm Size Matters: Mid-Sized Businesses Drive Hiring

Mid-sized companies (50–249 employees) led employment gains with 51,000 new jobs, while small businesses cut 13,000 positions and large firms trimmed payrolls by 3,000. The strong showing by mid-sized firms suggests some resilience in the middle market, even as hiring pressure intensifies in other areas.

Market Outlook: Bearish Bias on Labor Strength

The sharp drop in job creation and regional softness point to a weakening labor market. While steady wage growth offers some support to consumer demand, the overall tone of the report is bearish from a labor strength perspective. Traders should monitor upcoming Fed commentary closely, as softening employment may alter rate expectations heading into the summer.

Source: FX Empire

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Daniel Foster

Donald Trump is ramping up his attacks on Federal Reserve Chairman Jerome Powell. This time, it’s over a disappointing ADP jobs report and the Fed’s refusal to lower interest rates. Trump’s frustration spilled onto Truth Social where he called Powell “unbelievable!!!” and repeated his demand: “LOWER THE RATE.” His anger follows ADP’s announcement that private payrolls grew by just 37,000 in May—the weakest reading since March 2023. Trump argues the Fed is dragging its feet while other global powers move faster.

Weak Jobs Data Reignites Trump’s Fury

The ADP report shocked markets. Economists had forecasted a gain of over 110,000 jobs, but reality came up far short. This weak showing landed just before the official government report from the Bureau of Labor Statistics, making Wall Street even more nervous. Trump didn’t waste a second, pinning the blame on Powell and using it to renew his call for lower interest rates. He also noted that the European Central Bank has already lowered rates nine times. “We’re falling behind,” Trump warned, saying the U.S. is now at a global disadvantage.

Interest Rates Divide the Fed and Trump

Tensions between the Fed and the White House are heating up. Trump recently met Powell in person, reportedly telling him that holding interest rates steady is a mistake. Powell, in contrast, insists that decisions must be based on data, not politics. He’s taking a cautious stance, especially with inflation concerns tied to Trump’s new tariffs. The Fed has kept its benchmark rate at 4.25%-4.5% and is not expected to cut it at its upcoming June meeting. However, inside the Fed, a split is growing. Some members support eventual rate cuts, while others warn that inflation pressures—especially from tariffs—could linger.

Global Central Banks Cut While the Fed Waits

Outside the U.S., things look different. The European Central Bank has been aggressive with rate cuts—seven so far and an eighth expected soon. Their logic is that inflation is cooling and growth is sluggish. Even Switzerland may follow, with deflation showing up in recent data. Trump sees this global trend and can’t understand why the Fed isn’t acting. He argues that Powell’s hesitation puts American workers and businesses at a disadvantage. Trump’s message is clear: adapt or fall behind.

Interest Rates Policy Caught Between Politics and Data

The Fed’s approach to interest rates is rooted in long-term strategy. Powell says short-term political pressure can’t drive monetary policy. Still, Trump’s relentless push adds weight to the debate. If the economy keeps cooling and job data keeps missing forecasts, the Fed may have no choice but to act. But for now, Powell’s stance is to wait and watch. That patience, however, may only intensify Trump’s attacks.

Final Thoughts

The Fed’s next policy decision is set for June 17–18. As the date approaches, all eyes will be on the Labor Department’s full jobs report and inflation data. Trump will likely keep hammering Powell if the numbers don’t improve. With tariffs expected to drive prices higher, the Fed faces a tough call—cut rates to support jobs, or hold the line to contain inflation. Either way, the clash between Trump and Powell over interest rates isn’t going away anytime soon.

Source: CryptoSlate

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Catherine Richards

Federal Reserve Bank of Minneapolis President Neel Kashkari said the US central bank is well positioned to wait and see how tariff policies impact the economy before adjusting interest rates.

“The economy is seeming like it’s pretty resilient so far, and so for me right now is the time to get data, see how the tariff negotiations shake out before we reach any firm conclusions about the direction of interest rates,” Kashkari said Wednesday in an interview on CNN.

Kashkari said a pullback in business investment amid tariff uncertainty is an overhang for the US economy.

“The longer it goes on, the bigger negative effect it has,” Kashkari said.

He added that some businesses are examining different ways to eventually lay off workers and noted that the labor market has already softened some.

A report out earlier Wednesday showed private-sector hiring decelerated to the slowest pace in two years.

Fed officials have left interest rates unchanged so far this year, and are expected to do so again when they meet June 17-18.

Source: Bloomberg Europe

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Daniel Foster

The latest Beige Book has just landed, offering a snapshot of economic conditions across the Fed’s 12 districts. A slight decrease in overall economic activity.

Understanding the Federal Reserve’s Beige Book

Before diving into the specifics, let’s clarify what the Beige Book is. Published eight times a year, roughly two weeks before each Federal Open Market Committee (FOMC) meeting, the Beige Book provides anecdotal information on current economic conditions by district. It’s compiled from reports by Reserve Bank contacts, gathered through interviews with business contacts, economists, market experts, and other sources.

Think of it as a qualitative report offering on-the-ground insights that complement the quantitative data the Fed analyzes. It covers various sectors, including consumer spending, manufacturing, real estate, and labor markets. The Federal Reserve uses this information to help inform its monetary policy decisions, making it a closely watched report by economists and market participants alike.

Decoding the Findings: What Did the Report Reveal About Economic Activity?

The key takeaway from the recent report is the slight decline in overall economic activity. This isn’t a widespread collapse, but rather a subtle cooling reported across several regions. Here’s a breakdown of the general picture:

● Overall Trend: Most districts reported either no change or slight declines in activity. This suggests a broad-based, albeit gentle, slowdown rather than an isolated issue.

● Mixed Regional Performance: While the national picture showed a slight dip, the report highlighted variations. Some regions noted improved conditions or positive outlooks, while others saw activity soften further or expressed concerns about the future. This divergence indicates uneven economic performance across the country.

● Sector-Specific Weakness: Certain sectors might be experiencing more pronounced slowdowns than others, although the initial summary points to a general moderation rather than deep distress in any single area.

This reported dip in economic activity is a signal that previous economic momentum might be fading, which has direct implications for employment, consumer spending, and overall business health.

Inflation Watch: What Does the Beige Book Say About the Inflation Rate?

Another critical component of the Beige Book is its assessment of prices and wages, which provides insight into the current inflation rate. The latest report suggests that inflation is expected to continue at a moderate rate.

Why is this significant? It indicates that while inflation may have peaked from its highest levels, it hasn’t yet fallen back to the Fed’s target rate. The persistence of a moderate inflation rate means:

● The cost of goods and services is still rising, albeit perhaps at a slower pace than before.

● Businesses may still face pressure from higher input costs, potentially impacting their profitability.

● Crucially, it suggests that the Federal Reserve’s fight against inflation is not yet over.

This persistent moderate inflation rate complicates the Fed’s job. They are balancing the goal of bringing inflation down with the risk of causing a significant recession by tightening monetary policy too aggressively. The Beige Book’s qualitative data on price pressures provides valuable context for this delicate balancing act.

Challenges and Opportunities

The slight decline in economic activity presents challenges, such as potential recession risks and continued market uncertainty. However, it also presents potential opportunities. If the economy slows significantly, it could eventually lead the Federal Reserve to ease monetary policy, which has historically been a tailwind for risk assets, including the crypto market.

The persistence of the inflation rate remains a challenge, forcing the Fed to maintain a cautious stance. Navigating this environment requires patience and a clear understanding of the forces at play.

Conclusion

The Federal Reserve’s latest Beige Book offers a valuable, albeit slightly concerning, look at the U.S. economy. The report of a slight decline in overall economic activity, coupled with expectations for a moderate inflation rate, paints a picture of an economy that is cooling but still facing price pressures. These factors are highly relevant to the crypto market, influencing everything from investor sentiment to expectations around future Fed policy.

While the Beige Book doesn’t offer specific crypto trading signals, it provides essential context for the macroeconomic environment in which digital assets operate. Staying informed about these reports and understanding their potential impact is a key part of navigating the complexities of the current market landscape.

Source: CryptoSlate

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Daniel Carter

Central Bank

Economic

Base salaries rose by 2.2% in April from a year ago, accelerating from the previous month's revised 1.4% gain, the labor ministry reported Thursday. Nominal wages increased 2.3%, compared with economists' consensus estimate of a 2.6% gain. A more stable measure of wage trends that avoids sampling problems and excludes bonuses and overtime showed wages for full-time workers climbed 2.5%, staying at or above 2% for a 20th consecutive month.

On the downside, real cash earnings dropped 1.8% from a year earlier, falling more than the forecast 1.6% decline.

Growth in nominal wages is a key component of the virtuous economic cycle long sought by the BOJ. Authorities are looking for indications that rising pay is feeding into demand-led price gains as they mull the future course of policy. Thursday's data will likely keep Governor Kazuo Ueda and his board on track for another rate hike this year if conditions allow.

The outlook for wages is generally bright after annual negotiations between unions and companies resulted in pledges from employers to increase pay by more than 5% for a second straight year. Some workers saw their largest pay increases in over three decades, according to the latest tally by the nation's biggest trade union federation Rengo. Those gains will gradually start showing up in payroll stubs from around June, BOJ research has shown in the past.

A key driver behind wage growth has been the sustained tightness in the labor market, with the unemployment rate staying below 3% for more than four years. In its latest outlook, the central bank suggested that the growth rate of nominal wages is likely to remain elevated for the time being, citing continued labor shortages and limited slack in supply.

The BOJ is expected to hold its benchmark rate steady when it next sets policy on June 17, with the market's focus likely to be the bank's updated plans for bond purchases as it proceeds with quantitative tightening.

To be sure, some economists have warned that US President Donald Trump's tariffs could squeeze corporate profits, limiting the ability of some firms to offer generous compensation to workers. The BOJ also noted in its outlook report that the pace of nominal wage growth is likely to slow, affected by the decline in corporate profits, without providing context.

Meanwhile, the continued decline in real wages underscores persistent inflationary pressures, clouding the trajectory for domestic demand. In April, inflation accelerated to the fastest clip in more than two years, driven by higher food and energy costs. The trend will likely persist for at least the next few months, as indicated by data for the capital.

While nominal wages have steadily risen over the past four years, real earnings have only posted gains in four of those months. Economists widely expect real wages to stay subdued for some time before they begin to increase steadily.

Stagnant disposable income is damping consumer sentiment and weakening household spending, raising concerns that Japan could slip into a technical recession. In the first three months of the year, the world's fourth-largest economy shrank mainly due to weaker trade and sluggish consumption. A revised GDP figure due Monday is expected to show GDP remained in contraction.

Falling take-home pay has also fueled public dissatisfaction, adding pressure on Prime Minister Shigeru Ishiba as a critical upper house election looms in July. In response, his administration has unveiled measures aimed at both curbing inflation and boosting wages.

Among the latest steps is a sector-specific plan to raise minimum wages, mostly focusing on enhancing labor productivity through digitalization and automation. The plan is a possible path toward the target of raising the minimum hourly wage to ¥1,500 ($10.42) within five years, which would require annual increases of over 7% from the current ¥1,055.

In the same policy package, Ishiba's government set a goal of reaching 1% annual gains in real wages by the fiscal year starting in April 2029.

Source: Bloomberg Europe

To stay updated on all economic events of today, please check out our Economic calendar

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Manuel

Political

Central Bank

A red baseball cap sits above Michelle Bowman’s filing cabinet in her office at the US Federal Reserve in Washington. It’s emblazoned with the words “make community banks great again.” The TV in her office is tuned to Fox News, and the self-described workaholic has a sticky note on her door asking visitors to knock loudly because the door is heavy.

Already a Fed governor, Bowman will become one of the central bank’s key leaders, in charge of banking regulation. The Senate Banking Committee voted along party lines to advance her nomination as vice chair for supervision, and the full Republican-controlled chamber gave her its nod on Wednesday. The industry has praised Bowman’s nomination, highlighting her drive to scale back a massive bank-capital proposal that it says will hurt lending, erode its competitive edge and potentially reduce economic growth. Critics are concerned that she’s too focused on what banks want — at a time when the White House is embarking on a deregulatory drive, threatening the Fed’s independence and introducing tariff-fueled economic uncertainty that could put the financial system under pressure.

The timing of her nomination was due to Michael Barr’s surprise announcement that he would leave the job. Barr stepped down in February while remaining a governor, even though his term as vice chair extended to July 2026. He wanted to avoid a protracted legal fight over a possible demotion by Trump.

Bowman, who asks everyone she meets to please call her “Miki,” quickly made her interest in the job clear. She talked to state bank regulators who had lobbied to get her onto the Fed board in 2018, according to people familiar with the matter who didn’t want to be identified discussing the private communications. She asked some of them to signal to Treasury Secretary Scott Bessent that he should push Trump to fill Barr’s seat rather than leave it vacant, and pitched herself as a regulatory insider who wouldn’t even need to wait for Senate confirmation to get started. Industry players like the Independent Community Bankers of America and the American Bankers Association also rallied behind her. Bowman herself points to the experience she has gained in an eventful last seven years.

“I’ve seen a lot since I’ve been here at the Fed,” says Bowman, 54. “We’ve seen the entire shutting down of the economy and restarting it again.”

She will have to navigate a position that has been an awkward fit for the Fed, an agency that strives to remain as apolitical as possible in setting monetary policy. The supervision job was created by the Dodd-Frank Act in response to the 2008 financial crisis. Chair Jerome Powell himself has said that placing the burden of developing recommendations on a single person rather than the entire Fed board has made bank policy more volatile.

Bowman has deep roots in small-town banking. Born in Hawaii, she spent time living in Germany as a part of a military-kid upbringing, and worked in the UK. But home has always been rural Council Grove, Kansas, about 90 miles northeast of Wichita. “The closest town is about 35 miles away with a 2,200 population,” Bowman says. In Council Grove, she worked at Farmers & Drovers Bank, which her great-great grandfather helped charter in 1882, before becoming the Kansas state banking commissioner in 2017. A lawyer, she also previously worked in Washington as counsel to US House committees and as a policy adviser in the Department of Homeland Security during the George W. Bush administration.

She was first nominated to the Fed board by Trump in 2018, to fill a position designated for an expert on community banks, which have long been losing market share to bigger lenders. Since then, Bowman has criss-crossed the country — by her count visiting all but four states. She has given detailed speeches to community banking groups on how vital these lenders are to the economy. Her travels across the US and to five continents rival only Powell, among her board colleagues, in the number of engagements. Over time, she has become more vocal, often supporting easing regulations that she says are too burdensome for the smallest banks.

Her missives on regulation were often a foil to Barr’s attempts to significantly increase capital requirements for banks — that is, to have them further pad their financial cushions, depending on the risks they take, so they can absorb losses during a crisis. “My greatest concern about Governor Bowman is that I haven’t seen any daylight between her publicly stated positions and the wish list of the largest banks for lower capital requirements and less demanding supervision,” says Arthur Wilmarth, a professor emeritus at George Washington University Law School who was a consultant to the Financial Crisis Inquiry Commission created by Congress. That could change if she prioritizes coalition-building with other members of the board, he says.Bowman says regulation already has put banks on firmer ground. “We’ve created a much stronger, safer, sound banking system,” she says.

‘Thorny Issues of Fed independence’

The vice chair job is probably the most demanding in all of financial regulation, says Graham Steele, a Fed alumnus who also served as a Biden-era Treasury official. He adds that it’s a step up in difficulty from being a single governor with one vote and giving speeches on personal views. “That person has always had to balance a complex and delicate set of policy, political and procedural issues while finding consensus between and across the views of the other banking agencies and the Fed’s board members,” Steele says. “In this administration, they now also have to navigate thorny issues of Fed independence with a White House that’s seeking to bring independent agencies under political control, including the Fed’s regulatory functions.”

As a board member, Bowman will also continue to have a voice in monetary policy. In that realm, she has been somewhat more hawkish on interest rates than her colleagues. She cast the first dissenting vote by a governor in almost 20 years when she voted against the Fed’s decision to cut interest rates by half a percentage point in September. That was the first cut since the start of the pandemic; Bowman argued that a smaller, quarter-point cut would have been more appropriate given that inflation was still above the central bank’s 2% target.

She has a reputation for toughness. People who asked not to be identified discussing internal Fed matters said that tense interactions between Bowman and Fed staff led to a new practice where more senior officials with titles brief her and other governors on policy matters. But some observers see her style as a benefit. She dives into the details and makes sure she understands an analysis and its policy implications, says Mona Elliot, a former Fed official who now advises clients at Patomak Global Partners. “Ultimately, what the governors care about is really understanding the potential impact of the decisions that they’re making,” said Elliot, who briefed Bowman at the beginning of her time at the Fed in 2018.Randal Quarles, who held the supervision role before Barr after being chosen by Trump in 2017, says the highly qualified staff at the Fed has a culture that can sometimes be “too sure of itself” and that this is ripe for change.

Bowman has been willing to take on high-profile fights. Shortly after Silicon Valley Bank collapsed in 2023, she started calling for an independent review into what failings led to the lender’s fast fall. Barr did his own review, which he called an “unflinching look” at problems in both the supervision of the bank and the regulatory requirements for an institution of that size. Some critics said the details were vague, and Bowman has insisted the report is insufficient in terms of full accountability and transparency. She has said she wants to launch a third-party review.

Covid Lockdowns

During the 2020 Covid-induced lockdowns, Bowman was anxious about the Fed not being able to read the economy as the government was offering loans to businesses via banks using the Paycheck Protection Program without a lot of guidance or directives. She began a campaign to reach as many of those lenders as possible. Over the next year, she managed to talk to more than 220 community-bank chief executive officers in 30-minute phone calls. “I think that really helped allow them to engage with confidence and continue to be the greatest lenders in that program,” she says.

Before that campaign, she worked to get her arms around the Fed’s consumer compliance program. After hearing complaints about banks waiting three to five years for an exam report, she championed an effort to make the exam process more timely, while preserving its effectiveness.

To help advise her, Bowman has turned to the banking world for three staff hires, who recently joined the agency’s Division of Supervision and Regulation. Two sweeping proposals are on her radar: a landmark Biden-era bank-capital plan known as Basel III endgame and long-term debt requirements that would affect all lenders with more than $100 billion in assets. As originally drafted, the Basel plan would have hiked the biggest US banks’ capital requirements by 19%. The Fed walked it back after fierce industry opposition. Bowman is widely expected to support dramatically easing the requirements. She also plans to rescind the proposal to bolster long-term debt requirements, according to people familiar with the matter.

Bowman sided with the industry on its calls to increase the transparency of the Fed’s stress tests, which gauge how large banks would fare during a hypothetical recession. And she’s working with other Trump regulators on potential changes to a rule—the so-called supplementary leverage ratio—that has constrained banks’ trading in the $29 trillion Treasuries market.

Bowman has said she wants to keep the Fed’s experienced ranks of bank supervisors and examiners, arguing that they’re critical to the Fed being able to carry out its regulatory responsibilities. Already, the Trump administration is set to shrink the staff of other financial regulators by more than 2,300, including examiners. The Fed plans to reduce its workforce by about 10% in the next couple of years, but it isn’t clear whether that would include examiners.

“Our examinations staff are of the most importance when we’re talking about how we execute our responsibilities under supervision for the safety and stability and soundness of the banking system,” Bowman said during her Banking Committee nomination hearing in May. “If I were to do a review of our supervision and regulation division, should I be confirmed, I would certainly be very sensitive to the fact that we need to be able to fully and effectively implement our responsibilities for bank regulation.”

Source: Bloomberg

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Daniel Carter

Central Bank

Political

Bowman, a fifth-generation banker and Republican, has long touted the need for more “tailored” oversight in her speeches. She has signaled significant changes in regulatory priorities and has a friendlier relationship with the bank industry than her predecessor, Michael Barr.

Barr resigned from the role earlier this year. She frequently countered him on issues including bank oversight, stress-test reforms and capital rules.

Bowman has said that watchdogs should be better aligned in their goals for the financial system. That effort has already started to take shape, with Treasury Secretary Scott Bessent hosting Bowman and other regulators for private meetings in a bid to streamline oversight, according to people familiar with the matter. Bowman has also hired advisers from lending giant Goldman Sachs Group Inc., Wall Street legal heavyweight Davis Polk & Wardwell and big-bank lobbying powerhouse, the Bank Policy Institute.

Bowman has said that she will work with officials at the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency to re-propose a landmark US bank-capital proposal known as Basel III endgame. She was a sharp critic of the plan as originally drafted, which would have hiked the biggest banks' capital requirements by 19% to buffer against losses and a financial crisis.

She is also working with other regulators on potential changes to the supplementary leverage ratio. Critics have argued the SLR has limited banks' purchases of traditionally safer instruments like US Treasuries. Bessent said in May that officials may move this summer on easing that capital rule.

Dennis Kelleher, president of Washington-based consumer advocacy group Better Markets, said Bowman's role is to protect the jobs and savings of everyday Americans from the risks of Wall Street.

“Unfortunately, Bowman has the opposite views: while claiming to care about Main Street, she enthusiastically and unequivocally supports those banks' priority of deep, broad and mindless deregulation,” Kelleher said.

But industry groups, like the Independent Community Bankers of America, said in a statement that Bowman's real-world experience gives her a keen understanding of how certain regulations applied universally — regardless of a bank's complexity or risk profile — impedes access to credit for those who need it most.

Bowman told lawmakers in April that regulation has become overly complicated and redundant. She said she would “prioritize reforming and refocusing supervision, restoring regulatory tailoring, ensuring a viable path for innovation in the banking system, and promoting transparency and accountability” if confirmed.

Bowman, who previously served as the state bank commissioner of Kansas, was nominated in 2018 by Trump to become a member of the Fed's board.