ADP Employment Change expected to show 50K new jobs in September

ADP - A Decisive Miss That Vindicates "Weakening" Thesis
ADP report was a significant downside surprise, showing a loss of -32,000 jobs against a consensus expectation of a +52,000 gain. Critically, the prior month's print was also revised down from +54,000 to a contraction of -3,000. This is the first major piece of "hard" labour data this week, and it decisively validates the story told by yesterday's "soft" data (JOLTS quit rate, Consumer Confidence). It directly challenges the "resilience" narrative built on last week's strong backward-looking GDP and spending data and confirms, as ADP's chief economist stated, that "employers have been cautious with hiring."

Implications for my Strategic Views - Stagflation Strengthens, Soft Landing Weakens
- Moderate Stagflation:
This report significantly strengthens my base case. The "weakening labour market" is a core tenet of this scenario, and a negative print, combined with downward revisions, is a major step in that direction.

- Soft Landing:
The probability of a soft landing is materially diminished by ADP print. A soft landing requires a gradual, controlled cooling of the labour market, not an outright contraction. This report suggests the slowdown may be happening faster and more abruptly than a soft landing scenario would allow.

- Hard Landing:
The risk of a "growth collapse" scenario has increased. While not a collapse in itself, a negative print well below consensus raises the probability of a non-linear deterioration in the labour market going forward.

Implications for the Fed - A Green Light for Easing
Data provides powerful ammunition for the dovish wing of the FOMC. It directly validates their recent pivot and their stated concerns about "risks to employment." Following yesterday's weak confidence data, this report makes it very difficult for any remaining hawks to argue for a pause in the easing cycle. This print solidifies market expectations for a 25bps cut in October & December, and will likely increase bets on a deeper cutting cycle into 2026.

The focus would normally now shift to Friday's NFP report to either confirm or deny this sudden loss of momentum, however with the Government shutdown in effect - this hard data may now become critical for market pricing, as evidence by the slight increase of a double cut in December before year end (below).

The only question, in my mind, is how many and how deep will the cuts be?

Trump will probably tweet: Powell's too late - cut 1% - wrong/ain't gonna happen

0.25% at next meetings or a 0.5% followed by 0.25%

You might be waiting a while if the shutdown delays release.

This was supposed to push gold up but it ended up plumbing it, wtf

powell will not cut .5% 25 bps