Critical ADP Jobs Report

Quick Overview

The December ADP National Employment Report showed a stronger-than-expected job market rebound, with private employers adding 41,000 jobs, which the speaker views positively despite noting that the 2-year/10-year yield curve is inverted and that the upcoming official BLS jobs report on Friday will be the real catalyst.

Key Points: Private employers added 41,000 jobs in December 2025, exceeding the speaker's expectation of 50,000 (which was actually higher than the consensus estimate of -32,000 revised to -29,000 from the previous month). The hiring rebound was led by Education/Health Services (+39,000) and Leisure/Hospitality (+24,000), while Manufacturing lost 5,000 jobs and Professional/Business Services lost 29,000 jobs. The speaker notes that the 2-year/10-year Treasury yield curve is inverted, sitting at 0.68, which historically signals a recession, but finds the strong ADP numbers encouraging. Job-stayer pay growth was unchanged in December at 4.4% year-over-year, but job-changers saw their pay growth accelerate to 6.6% from 6.3%, indicating a competitive labor market demand. The speaker emphasizes that the official BLS jobs report on Friday will be the true catalyst for market movement, as ADP data is often revised and is typically less influential. The speaker is optimistic about the data suggesting a soft landing is possible, rather than a hard landing or immediate recession, because job creation is still occurring despite the yield curve inversion.

Context: The speaker is analyzing the December 2025 ADP National Employment Report, a high-frequency view of the private-sector labor market, juxtaposing its findings against current market conditions, particularly the inverted 2-year/10-year Treasury yield curve, which often precedes economic recessions. The speaker is wearing a festive holiday sweater and is using a phone to read the data while displaying stock charts (QQQ) and the ADP report on a separate screen.

Detailed Analysis

The speaker analyzes the December 2025 ADP National Employment Report, finding the results largely positive, especially concerning the 41,000 jobs added by private employers, which was better than expected considering the previous month's downward revision from -32,000 to -29,000. He notes that the hiring rebound was concentrated in late-cycle sectors like Education/Health Services (+39,000) and Leisure/Hospitality (+24,000), while goods-producing sectors like Manufacturing lost 5,000 jobs. The speaker contrasts this positive jobs data with the inverted 2-year/10-year yield curve (at 0.68, down 3.82%) which historically signals recession, though he notes the curve is stabilizing. In terms of pay, job-stayers' growth remained unchanged at 4.4%, but job-changers saw acceleration to 6.6% from 6.3%, which he interprets as a positive sign of strong labor market demand. He concludes that while the ADP data is encouraging for a soft landing scenario, the official BLS jobs report coming on Friday will be the ultimate market catalyst.