ADP vs. BLS: Which One Tells the Real Story?
The latest batches of U.S. employment data underscore how much methodological differences can shape our understanding of the economy. One report showed an unexpected contraction in employment for June, while another painted a picture of a resilient labor market with stronger-than-expected growth.
On Wednesday, payroll processor ADP reported that private employers slashed 33,000 jobs in June, with losses mainly concentrated in professional and business services, healthcare, and education. Overall, the service sector shed a combined 66,000 jobs, while goods producers added 32,000 positions. This was the first time the private sector posted a net job loss since March 2023, when the economy was still healing from the COVID-19 pandemic.
However, just a day later, the Bureau of Labor Statistics (BLS) reported that the economy added 147,000 jobs in June—well above The Wall Street Journal’s consensus forecast of 110,000 and a sharp contrast to the ADP figures. The unemployment rate also unexpectedly fell to 4.1% from 4.3%.
The most obvious reason for the divergence is that the two reports use different methodologies. ADP samples payroll data primarily from mid-sized companies, while the BLS relies on a larger, stratified survey with seasonal adjustments. Technical factors such as sector weights, holiday timing, and subsequent revisions also contribute to the discrepancies.
Although several economists quickly dismissed the latest ADP figures in light of the BLS report, outright dismissal hasn’t always been the norm. Until around 2012, research frequently noted a strong positive correlation between the ADP and BLS reports, often citing correlation coefficients above 0.7. This correlation was even discussed in a 2012 Federal Reserve research paper that has since disappeared from the FEDS Note website.
However, a 2019 paper by five Federal Reserve researchers “reassuringly” found a positive correlation between the official BLS Current Employment Statistics—used to produce the nonfarm payroll numbers—and the ADP data, once the ADP figures were reweighted to account for firm size and industry mix.
The researchers concluded that the BLS and ADP “monthly employment gains track each other over time but typically differ in any given month,” adding that “this is to be expected as both employment gains estimates are sample based and thus subject to measurement error.”
Regarding which report carries more weight, economists and investors generally rely more on the BLS data, as it is the data set the Federal Reserve uses to guide interest rate decisions and broader monetary policy. The BLS data also serves as a reference point for the Federal Open Market Committee (FOMC) when issuing its quarterly unemployment projections.
Other economists caution that the real question isn’t whether to trust ADP or BLS, but rather to focus on the bigger picture: the pace of hiring has slowed noticeably compared to last year’s average. Before June’s report, the U.S. economy had added an average of 124,000 jobs per month this year, down sharply from a monthly average of 168,000 in 2024. The combined effects of rising tariffs, public sector layoffs, and a crackdown on immigration are weighing on the labor market.
The Fed’s Holding Pattern May Come at a Cost
Before Thursday’s BLS report, futures markets were pricing in a strong probability that the Federal Reserve would begin cutting interest rates in September—a meeting that carries extra significance as it follows the annual Jackson Hole Symposium, includes updated quarterly projections, and coincides with key seasonal shifts in the market.
However, the firmer jobs data caused those rate-cut expectations to drop sharply, falling to around 33% according to the CME Group’s FedWatch Tool.
“A stronger-than-expected June jobs report indicates no Federal Reserve rate cut before September despite the President’s demands,” wrote ING chief international economist James Knightley, referring to President Donald Trump’s repeated calls for lower rates, including a handwritten letter to Fed Chair Jerome Powell demanding immediate action.
Although FOMC members Michelle Bowman and Chris Waller have suggested they could support a rate cut as early as July, it’s more likely the Fed will hold steady until at least September, “especially with tariffs set to push inflation higher over the next few months,” Knightley added.
“It will be very difficult for the Fed to cut rates in this environment with the labor market so strong,” Merk Hard Currency Fund president Axel Merk told Reuters. “The argument that Jerome Powell has made for the Fed to stay on the sidelines continues to hold.”
The behavior of the bond market, in particular, suggests that investors think “Powell has even more reason to not cut rates here,” wrote The Kobeissi Letter, a markets commentor.
The Fed’s steady hold on rates since the start of the year has widened U.S. interest rate differentials relative to the rest of the world—a gap that could force policymakers to play catch-up next year. Morgan Stanley’s Matthew Hornbach and Michael Gapen argue that the Fed may deliver as many as seven rate cuts in 2026 as its focus shifts to shielding the economy from a potential recession.
Market Reaction
Thursday’s stronger-than-expected jobs report had an immediate impact on the beleaguered U.S. dollar, which, despite hovering near multi-year lows, rallied on the news.
The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, rose 0.4% to 97.14. The dollar gained ground against the Japanese yen and Swiss franc—two safe-haven currencies that have strengthened significantly against the greenback this year.
The USD/JPY climbed 0.9% to 144.93, while the USD/CHF rose 0.4% to 0.7953.
Meanwhile, the euro weakened for a second straight day, with the EUR/USD slipping 0.4% to 1.1760.
The dollar’s rebound came alongside a rise in U.S. Treasury yields. The 2-year yield, which is particularly sensitive to interest rate expectations, jumped 9 basis points to 3.886%, while the benchmark 10-year yield rose 5 basis points to 4.348%.
Despite the modest rebound, the U.S. dollar just logged its worst first-half performance since 1973 and shows little sign of mounting a meaningful recovery anytime soon.
