Non-farm payrolls show strength, while the ADP private survey reveals a job decline. Historically, these two surveys often report differing results. In June, non-farm payrolls noted an increase of 147,000 jobs, whereas ADP recorded a decrease of 33,000. Notably, half of the job gains in the official data were from government hiring, which ADP does not include. One idea for this discrepancy is related to immigration patterns. The ADP survey may better reflect jobs held by undocumented immigrants than government data does. These workers might be paid in cash or find ways to work without being noticed, and such jobs could decrease due to stricter enforcement actions. Companies and immigrants might hesitate to report undocumented work in official non-farm payroll surveys. They could fear negative consequences or choose not to participate. Government data might show a replacement of jobs held by undocumented immigrants with legal workers, which could help explain the high hiring numbers. However, there isn’t strong evidence to support this theory. These gaps in employment reports have impacted financial markets, leading to a rise in the US dollar and lowering expectations for interest rate cuts by the Federal Reserve. The role of immigration in the US economy remains critical and deserves close observation. This article highlights a common issue: two different measures of job creation in the US—the non-farm payrolls and the ADP private survey—often produce conflicting results. Recently, this gap has become more pronounced. While government data showed job growth, private data suggested a decline. Much of this job growth in the official figures came from sectors not covered by the ADP survey, like government roles, which is important for understanding the US economy’s overall direction. One explanation for this divide centers on immigration. There’s speculation that the ADP survey accounts for employment types that the official data might miss, like off-the-books workers or those not tracked by the government. These differences can become more noticeable with increasing immigration enforcement or when certain industries hire more legal workers instead of undocumented ones. While government figures show one story, ADP might capture a different perspective based on who they include in their data. However, this idea remains largely untested. While plausible, it lacks comprehensive measurable evidence. The markets have noticed these differences. Consequently, the dollar’s value has risen, and the chances of interest rate cuts have decreased. Traders are responding to the more optimistic government data, which creates its own effects. In situations like this, gaps between actual data and market reactions can create trading opportunities, but they also carry higher risks. It’s essential to differentiate between lasting changes and temporary distortions. Future employment reports could reshape expectations. The varying speed of data revisions and how different sectors weigh in the surveys may open pathways for inefficiency. Given this context, we adjust our views for the short term. When government hiring drives much of the payroll growth, we should be cautious about assuming broader economic strength, especially since those jobs often do not reflect changes in consumer demand or confidence in private businesses. If we see more divergence, we’ll focus closely on sectors that show cyclical strength. Policymakers usually react to main figures, but significant differences between indicators could complicate their future decisions. Price movements in short-term yields are especially influenced by this changing outlook. If government-related hiring does not translate into real wage growth or boosts in private spending, inflation risks may decrease more quickly than anticipated. In that scenario, the adjustments seen this month could reverse. For now, though, we expect heightened volatility around key data points, and we’ll adjust our positions selectively in response to upcoming reports.

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