07 July 2023
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SMEs drive US private sector job growth in June

By Khatija Haque

US data released overnight showed a still-strong labour market, with the ADP (private sector) employment change showing a gain of 497k last month, well above the 225k forecast and the 267k jobs added in the private sector in May. While the ADP reading is not a particularly good predictor of non-farm payrolls, it showed small and medium sized businesses (with up to 250 employees) still hiring strongly, offsetting a decline of 8000 jobs at large firms. Over three-quarters of new private sector jobs last month were in the services sector. Activity surveys for the US services sector also showed growth last month, with the S&P Global PMI rising to 54.4 in June from 54.1 in May, while the ISM services index rose to 53.9 from 50.3 in May, above expectations.  

Separately, the JOLTS survey for May showed that job openings in the US declined slightly to 9.8mn from 10.3mn in April. Job openings per unemployed worker was still well above pre-pandemic levels at 1.6 in May.

German factory orders rose by much more than forecast, up 6.4% m/m in May although they were still down -4.3% y/y. The increase was largely driven by vehicle manufacturing and strong order growth in “other transport equipment”. The monthly rise in factory orders was the largest since June 2020 when the economy reopened after the first pandemic lockdown.

The UK construction PMI fell to 48.9 in June from 51.6 in May, coming in below the median forecast. Housing activity contracted further to 39.6 from 42.7 in May, the lowest reading in over three years.   

Today’s Economic Data and Events

  • 10:00 Germany industrial production (May) forecast 0.5% y/y
  • 16:30 US non-farm payrolls (Jun) forecast 225k
  • 16:30 US unemployment (Jun) forecast 3.6%
  • 16:30 US average hourly earnings (Jun) forecast 0.3% m/m (4.2% y/y)

Fixed Income

  • Signs of persistent strength in the US labour markets caused a surge in US Treasury yields overnight with the 2yr UST getting up to almost 5.12% at one point before fading the move. The pop in yields gradually unwound over the trading session with yields closing up about 4bps at 4.9806%. The rise in yields was more sustained on the 10yr with UST yields closing at 4.0291%, up nearly 10bps.
  • European bond markets also endured heavy selling as strong labour market data raises the prospect of more hikes from central banks ahead. The 10yr bund yield added 15bps to 2.622% while the 10yr gilt rose almost 17bps to 4.653%.
  • Emerging market bonds also had a heavy day with yields on South African 10yr yields up 20bps at 11.964% while Turkey 10yr yields rose 13bps to 16.17%.


  • The dollar faded against major peers overnight despite the substantial run in yields. EURUSD rose by 0.3% to 1.0889 while GBPUSD gained 0.3% to 1.274. USDJPY also moved in favour of the yen, down by 0.4% to 144.07, its biggest single-day drop since early June.
  • Commodity currencies fared worse, however. USDCAD rose by 0.7% to 1.3368 while AUDUSD fell by 0.4% to 0.6626 and NZDUSD fell by 0.4% to 0.6157.


  • Equity markets tumbled yesterday as rate hike bets mounted on strong labour market data from the US and general hawkish commentary. In the US, the S&P 500 and the NASDAQ both dropped 0.8% while the Dow Jones fell 1.1%.
  • Losses were even more pronounced in Europe where the composite STOXX 600 ended the day 2.3% lower as the DAX lost 2.6% and the CAC 3.1%. In the UK, the FTSE 100 lost 2.2%.
  • Locally, the DFM was a global bright spot as it managed to climb 1.0% yesterday. The DFM dropped 0.2% while the Tadawul gained 0.1%.


  • Oil prices had a brief rout late in the session though recovered with both Brent and WTI showing only modest moves on the close. Brent futures dropped by less than 0.2% to USD 76.52/b while WTI was near flat at USD 71.80/b.
  • Crude stocks in the US dropped by 1.5m bbl last week along with substantial draws in gasoline and distillate inventories. Oil production was higher by 200k b/d at 12.4m b/d.



Written By

Khatija Haque Head of Research & Chief Economist

Edward Bell Head of Market Economics

Daniel Richards Senior Economist

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