ADP Employment Data Released! US private sector expected to remain stable in November, labor market resilience may deepen internal divisions at the Federal Reserve.

Amid delayed release of key economic data due to the government shutdown, the market is closely watching the ADP private sector employment report for November, which is set to be released on Wednesday. This non-core monthly data now plays an exceptionally important role before the Federal Reserve's interest rate meeting next week. Economists have significant differences in forecasts for November job growth: FactSet survey predicts an addition of 40,000 employees in the private sector, but media consensus expects only an increase of 5,000 people, reflecting mixed signals in the labor market. October ADP data showed an addition of 42,000 jobs in the private sector, with education and healthcare, as well as trade, transportation, and utilities industries being the main sources of growth. However, since the release of October data, ADP's weekly tracking has consistently shown companies reducing positions, with an average weekly decrease of around 13,500 employees in the private sector in the four weeks leading up to November 8th. Correspondingly, the latest Federal Reserve Beige Book indicated a "slight decrease" in national employment, with half of the regions reporting weakening labor demand, including slight job declines in the New York, Dallas, and Minneapolis areas from early October to mid-November. Due to the government shutdown, official employment reports from the Bureau of Labor Statistics (BLS) for October and November have been postponed to be released on December 16th, after the Federal Reserve's meeting on December 9-10. This week's ADP data will be forced to become an important reference for policy decisions before the Fed's meeting. However, Morgan Stanley also warns that ADP's forecasting accuracy has been weak in the past year, with its weekly data often failing to accurately predict monthly employment outcomes. If November job growth performs close to the more optimistic market expectations, showing resilience in the labor market, this could further differentiate opinions within the Federal Reserve on whether to cut interest rates in December. Several officials have recently expressed support for a rate cut, including New York Fed President Williams, who stated on November 21 that there is room for a rate cut "in the near term." Federal Reserve Governor Waller and San Francisco Fed President Daly are more explicit in leaning towards a rate cut at the December meeting, citing signs of weakness in the labor market. However, if ADP data does not show a significant cooling, hawks within the policy-making body concerned about inflation remaining above the 2% target will have more reasons to hold their ground. Apart from ADP and the Beige Book, other employment-related indicators have not shown a sharp deterioration. The latest weekly initial jobless claims in the U.S. decreased by 6,000 to 216,000, remaining in a lower range, indicating that layoffs have not significantly expanded. The "labor differential" in consumer confidence remained stable in November, with the proportion of those feeling "jobs are hard to get" slightly decreasing from 18.3% in October to 17.9%. Employment in small businesses also showed slight improvement, with the Paychex employment index rising to 99.38, a slight increase of 0.11 points from October, indicating some stabilization in employment conditions for this group. Despite mixed employment signals, financial markets continue to bet heavily on a rate cut in December. According to CME FedWatch data, the market-implied probability of a rate cut is as high as 87%, far exceeding the level of only 37% after the October meeting. However, the ADP employment report, on which the market heavily relies, itself has uncertainties, and its results could once again trigger volatility in expectations. With the Federal Reserve entering a blackout period and official employment data being delayed, Wednesday's ADP report may become the "last piece of the puzzle" affecting the December rate decision, potentially influencing market and policy-makers' judgments on labor market trends.