Key Takeaways
- The ADP Employment Change report for October is anticipated to show 25,000 new private-sector jobs, a rebound from September’s decline.
- This report gains significance due to the ongoing US government shutdown, which may delay other key labor market data.
- The labor market’s performance is a crucial factor for the Federal Reserve’s monetary policy decisions, including potential interest rate adjustments.
- A stronger-than-expected ADP report could support the US Dollar by reinforcing hawkish Fed sentiment, while a weaker report might increase pressure for rate cuts.
- The USD Index (DXY) has seen recent gains, but technical analysis suggests potential resistance around the 100.00-100.25 level.
ADP Jobs Report: Employment and the Federal Reserve
The upcoming ADP Employment Change report for October is expected to reveal the addition of approximately 25,000 private-sector jobs, a noticeable increase from the 32,000 net job losses reported in September.
These figures are particularly important this month, as the extended US government shutdown is likely to prevent the release of widely followed economic indicators such as the JOLTS Job Openings and the Nonfarm Payrolls (NFP) report.
The ongoing signs of weakness in the US labor market have been a significant influence on the Federal Reserve’s decision to cut interest rates by 25 basis points on October 29. This trend continues to be a primary concern for policymakers advocating for a more accommodative monetary stance.
In light of this, the October ADP report, while expected to show a recovery in private sector payrolls, is likely to still point towards a subdued labor market.
Labor Market Data and Monetary Policy
Preliminary data from ADP indicated an average monthly job growth of 14,250 in the four weeks leading up to October 11. The market consensus is for 25,000 new jobs in October, which would partially offset the September decline but remains considerably below the 150,000 average monthly job creation seen over the past 15 years.
From a monetary policy standpoint, the ADP report is poised to underscore the complex challenges facing the Federal Reserve. The central bank must balance a weakening labor market against potential inflationary pressures.
This situation has created differing views among policymakers, which Fed Chairman Jerome Powell identified as a key reason for tempering expectations of further monetary easing in December.
Currently, the probability of a 25 basis point rate cut in December has decreased to 64% from over 90% a week ago. This shift has been a significant factor in the recent recovery of the US Dollar (USD).
Should the ADP report exceed expectations, it could alleviate concerns about employment and refocus attention on inflation, lending support to Powell’s hawkish outlook and providing an additional boost to the US Dollar.
Conversely, another disappointing report, particularly if it shows a further decline in net job creation, would likely increase pressure on the Fed to lower borrowing costs, potentially leading to a weaker US Dollar.
ADP Report Release and USD Index Impact
The ADP will release its US Employment Change report on Wednesday at 13:15 GMT, with projections suggesting an addition of 25,000 private sector jobs for October.
Leading up to the release, the US Dollar strengthened against its major counterparts following the Federal Reserve’s hawkish cut announcement last week. The US Dollar Index (DXY) has gained approximately 1.3% since then, surpassing the 100.00 psychological level.
Technically, the US Dollar Index is in a bullish trend, driven by diminishing prospects of Federal Reserve interest rate cuts. However, the Relative Strength Index (RSI) is approaching overbought territory across most timeframes as prices near a significant resistance level between 100.00 and August’s peak of 100.25. A bearish correction from these levels is a possibility.
Despite potential pullbacks, downside movements are expected to be contained. Support is anticipated near the October 9 high of 99.55, or around the October 30 low of 98.90. Above 100.25, further upside targets include the May 29 high near 100.55 and the May 16 high at 101.25.
Fed FAQs
What does the Federal Reserve do, how does it impact the US Dollar?
The Federal Reserve (Fed) determines US monetary policy. Its dual mandate is to maintain price stability and promote full employment. Its primary tool for achieving these objectives is adjusting interest rates.
When inflation exceeds the Fed’s 2% target, it increases interest rates, thereby raising borrowing costs across the economy. This typically leads to a stronger US Dollar as it enhances the attractiveness of the US for international investors.
Conversely, if inflation falls below 2% or the unemployment rate is high, the Fed may lower interest rates to stimulate borrowing, which tends to weaken the US Dollar.
How often does the Fed hold monetary policy meetings?
The Federal Reserve (Fed) convenes eight policy meetings annually. During these meetings, the Federal Open Market Committee (FOMC) evaluates economic conditions and makes decisions on monetary policy.
The FOMC comprises twelve Fed officials: the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents who serve one-year rotating terms.
What is Quantitative Easing (QE) and how does it impact USD?
In exceptional circumstances, the Federal Reserve may employ Quantitative Easing (QE), a policy designed to substantially increase the flow of credit in a struggling financial system.
QE is an unconventional measure used during crises or when inflation is very low. It was notably utilized by the Fed during the 2008 Great Financial Crisis. The process involves the Fed creating new money to purchase high-quality bonds from financial institutions, which typically weakens the US Dollar.
What is Quantitative Tightening (QT) and how does it impact the US Dollar?
Quantitative Tightening (QT) is the inverse of QE. In this process, the Federal Reserve ceases purchasing bonds from financial institutions and does not reinvest the principal from maturing bonds it holds. This action is generally positive for the value of the US Dollar.
Economic Indicator: ADP Employment Change
The ADP Employment Change report, issued by Automatic Data Processing Inc. (the largest payroll processor in the US), measures the change in private-sector employment. An increase in this indicator generally has positive implications for consumer spending and can stimulate economic growth.
Traditionally, a strong reading is considered bullish for the US Dollar (USD), while a weak reading is seen as bearish.
Why it matters to traders?
Traders often view the ADP report as a leading indicator for the Bureau of Labor Statistics’ Nonfarm Payrolls (NFP) report, which is usually released two days later, due to their historical correlation, although significant month-to-month discrepancies can occur.
For FX traders, a persistent strong increase in employment figures signals rising inflationary pressures, increasing the likelihood of the Fed raising interest rates. Consequently, actual figures that surpass consensus expectations tend to be USD bullish.
Next release:
Wed Nov 05, 2025 13:15
Frequency:
Monthly
Consensus:
24K
Previous:
-32K
Source:
ADP Research Institute
Final Thoughts
The upcoming ADP Employment Change report is expected to signal a modest increase in job creation for October, providing a potential counterpoint to September’s decline.
Market participants will be closely watching this report for insights into the labor market’s health, especially given the potential disruption to other key economic data releases due to the ongoing government shutdown.
The outcome of the ADP report could influence Federal Reserve policy expectations and, consequently, the trajectory of the US Dollar.