03.09.202613:27 Forex Analysis & Reviews: EUR/USD: ADP and JOLTS deliver fresh warnings for dollar ahead of NFP.

A "black patch" has begun in US macro data—or, more precisely, a "red patch." The key releases over the last three days disappointed, reflecting negative trends. Yesterday's ADP report added another worrying brushstroke to a picture of a gradually cooling US labor market.

According to the data, the private sector added only 38,000 jobs in August, versus a weak 47,000 consensus. July's figure was revised up slightly (from 44,000 to 46,000), but that adjustment does not change the overall picture: August's gain was the smallest since January. The spring hiring impulse appears to have run out of steam. ADP has shown sequential (and rather pronounced) deceleration for the third month in a row.

The weakness of the August release is particularly visible in its composition. The goods-producing sector—manufacturing and mining, construction, and agriculture—shed 10,000 jobs: manufacturing lost 17,000 and mining a further 5,000. The sole positive in that group was construction (+12,000).

Services looked better (+48,000), but that headline masks an uneven picture. Almost all the gain came from education and health (+45,000) and hospitality (+16,000). Professional and business services cut payrolls by 16,000; trade, transport, and utilities lost 5,000; and information shed 4,000.

In short, the problem is not just a weak headline number. The problem is that the engines of job creation are becoming ever narrower. Virtually the entire private sector increase was driven by education and health, while cyclical sectors continued to shed jobs.

The firm-size breakdown is also striking. Small firms created only 3,000 jobs, medium firms created none, while large employers added 34,000. Nearly 90% of August's payroll gain came from firms with 500 or more employees—hardly a sign of broad-based, multi-layered, sustainable hiring.

There is more. Wages also showed disappointing dynamics. Core wages rose only 3.2% year-on-year, and for employees who did not change jobs the increase was 3.0%. For those who changed employers, the rate was 4.7%. Annual pay growth for job-switchers slowed to 7.3% from 7.5% a month earlier.

All of this points to a labor market showing both weak hiring and cooling wage pressure.

Of course, one should not mechanically map ADP onto the official non-farm payrolls (NFP) for August. The two reports use different methodologies, and ADP covers only the private sector. While the long-run correlation between the two series is high (roughly 94–95%), month-to-month divergence can be substantial. A weak ADP is therefore not a guarantee of weak NFP.

Yet in the current context the ADP signal is concerning, particularly alongside other signs of labor market softening.

The day before, the JOLTS report painted a mixed picture that also weighed on the dollar. Job openings rose by 89,000 in July to 7.271 million, but June was revised down sharply by 177,000 to 7.182 million. New hires fell roughly 278,000 to 5.054 million, and the hiring rate dropped to 3.2% from 3.4%. Layoffs did decline—from 1.785 million to 1.666 million—which superficially looks constructive. But viewed together with other indicators, the JOLTS data point to a labor market in which firms are reluctant to fire but also unwilling to hire aggressively: the classic "low-hire, low-fire" scenario that signals stagnation more than acceleration.

In short, ADP and JOLTS tell the same story: US companies are not expanding payrolls rapidly, and the weakness shows mainly through slower hiring rather than through a wave of layoffs. That nuance matters.

The "red tone" of ADP and JOLTS ahead of Friday's NFP does not bode well for the dollar—especially given modest consensus expectations (consensus forecasters expect 58,000 new jobs after a 23,000 decline in the prior month). The mix of weak ADP, falling hiring rates in JOLTS, and deterioration in cyclical sectors raises the odds that the official release will disappoint.

If NFP does print weak, the balance of risks facing the Fed will shift materially toward cooler labor market conditions and a slowing economy. That matters for Kevin Warsh's stance after Jackson Hole. On the one hand, Warsh emphasized persistent inflation risks and the possible need for further tightening. On the other hand, he repeatedly stressed that future decisions will be data-dependent.

That is why a softer labor market can act as a counterbalance to elevated inflation. If Friday's report confirms a sustained slowdown in hiring, traders will have reason to doubt the case for additional tightening. Even with inflation pressures present, the Fed must weigh its dual mandate—and a weaker NFP would be dollar-negative. The weaker the NFP, the more the market will price a more cautious Fed.

Therefore, in my view EUR/USD still has upside potential—at least toward the 1.1610–1.1650 range (the middle Bollinger Band/Tenkan-sen on D1). Sellers failed to press below 1.1580 (the lower Bollinger Band on the 4-hour chart), and buyers have taken the initiative. If NFP comes in substantially below expectations, EUR/USD may stage a northern breakout and retest the 1.17 figure—but that would be another story.