US payrolls data looms as hiring slows to 35,750 a week

US hiring slowed to 35,750 weekly jobs in the four weeks through May 9, ADP data showed Tuesday, as investors brace for the government's May payrolls report that could determine whether the Federal Reserve's next move is a cut or a hike.

"The labor market is cooling from the elevated pace seen in March, but the trend remains above the level needed to keep the unemployment rate stable," said Nela Richardson, chief economist at ADP Research. "For the Fed, this means the data-dependent approach remains the only viable path."

The ADP NER Pulse, a weekly estimate based on a four-week moving average of seasonally adjusted data, showed hiring decelerated from 40,750 in the week ending May 2. The reading extends a pattern of uneven gains: weekly additions ranged from 10,000 in early March to 40,250 in late March and early April. Over the 12 weeks through May 9, the average weekly gain stood at roughly 28,700, according to the ADP data, well below the 40,000-plus pace that had fueled concerns about an overheating labor market in late March.

The data comes as markets reassess the likelihood of further rate increases. Persistent inflation readings have pushed the probability of a rate hike at the Fed's June meeting to a level that has rattled equity investors. The May nonfarm payrolls report, scheduled for release June 6, will provide the most comprehensive picture of labor market conditions and could determine whether the S&P 500's year-to-date rally can withstand a more hawkish Fed.

Cooling Trend or Temporary Lull?

The ADP figures suggest the labor market is gradually rebalancing after a period of above-trend hiring. Weekly job gains averaged roughly 33,000 over the past 12 weeks, down from the 40,000-plus pace seen in late March. If the official payrolls data confirms a similar trend, it could ease pressure on the Fed to resume tightening — a scenario that would support bond prices and growth stocks.

However, the path is far from certain. The ADP data has a two-week lag, meaning the May 9 reading may not fully capture more recent conditions. Markets will scrutinize the government's May jobs report for confirmation of the slowdown or evidence that hiring remains too strong for inflation to return to the Fed's 2 percent target. The trajectory over the next two months will be critical: the ADP data shows the labor market has swung from a low of 9,000 weekly jobs in late February to a high of 40,250 in late March, highlighting the volatility that makes the Fed's data-dependent approach particularly challenging.

Cross-Asset Stakes Rise

The payrolls report carries implications across asset classes. A strong reading could push the two-year Treasury yield higher, strengthen the dollar and pressure rate-sensitive sectors such as real estate and utilities. A weak print, by contrast, would revive bets on rate cuts, boosting bond prices and supporting the equity rally.

Beyond labor data, investors are also watching Broadcom Inc.'s quarterly results, due later this week. The chipmaker's earnings will provide a key read on AI infrastructure demand and could sway the technology sector, which has been a primary driver of the equity rally. A disappointing report, combined with hawkish labor data, could amplify selling pressure in growth stocks, while a strong beat could offset some of the macro concerns.

This article is for informational purposes only and does not constitute investment advice.