Exceptionally Weak Data Sparks Debate on Wall Street and in Washington

The May 2025 ADP jobs report has ignited fierce debate across U.S. financial markets, central banking circles, and the political establishment. According to the data, the U.S. private sector added just 37,000 jobs in May—far below the forecast of 111,000 and the weakest monthly gain in over two years. Immediately after the release, former President Donald Trump sharply criticized Fed Chair Jerome Powell, demanding an immediate rate cut, while the Fed maintained a cautious, wait-and-see approach.

Numbers Worry the Market: Weak Employment Print and Signs of a Slowdown

ADP reported only 37,000 new private sector jobs in May, compared to Wall Street’s expectation of 111,000. This is the worst reading since February 2022. April’s figure was also revised down to 60,000 from the previous report of 62,000. The sharp deceleration underscores a real shift in momentum—especially given the gap between projections and reality.

This labor market slowdown comes amid moderating inflation, generally stable business activity, but clear signs that hiring is stalling—a particularly important signal as ADP data is seen as a leading indicator ahead of the government’s official payrolls report.

Trump Attacks: “Powell Must Lower the Rate—Europe Has Lowered Nine Times!”

Trump wasted no time in responding, posting: “ADP NUMBER OUT!!! ‘Too Late’ Powell must now LOWER THE RATE. He is unbelievable! Europe has lowered NINE TIMES!” The former president is intensifying political pressure on the Fed, highlighting that Europe has already cut rates nine times since the start of its easing cycle, while U.S. rates remain unchanged.

This is not a one-off event—Trump has been pressing Powell for months, portraying high rates as a brake on the economy, especially ahead of the upcoming election and amid slower growth. Meanwhile, market analysts see the odds of a Fed rate cut this summer rising, particularly if labor market data continues to weaken.

Fed Response: “Not in a Hurry to Cut”—The Gap Between Market Data and Policy

In contrast to the political and market calls, the Federal Reserve is holding to a cautious line. Chair Powell has recently reiterated that the Fed is “not in a hurry” to cut rates unless there is clear and sustained economic and labor market weakness. The Fed’s stance is based on concern over a renewed inflation spike and a desire to see a string of weak data—not just a single report.

Still, the weak ADP release adds to a growing list of disappointing signals—including falling manufacturing orders (PMI), slower growth in services, and reports of layoffs in several core sectors. All of these may eventually prompt the Fed to reconsider its approach, especially if public and political pressure builds.

Market Analysis: Why This Report Matters—Economists Weigh In

Although ADP data does not always perfectly track the official Non-Farm Payrolls, it is viewed as a key market-moving indicator. Such a weak number signals that the post-pandemic recovery is losing steam, with many firms now opting to maintain existing staff and curb new hiring. Sectors like technology, banking, and retail reported weaker hiring, while only a handful—such as healthcare and social services—posted gains.

Economists explain that such data raises the odds of a rate cut, as the red-hot labor market of 2022–2023 gives way to one that is cooling, or even stalling. A marked slowdown in hiring, especially in lower-wage segments, could mark the start of a new economic cycle—less growth, more caution.

Market Impact: Treasury Yields Drop, the Dollar Weakens, Equities Rally

The financial markets reacted immediately: U.S. 10-year Treasury yields dropped after the release on expectations of Fed easing. The dollar weakened against major currencies, while leading equity indices rallied as traders priced in rate cuts as early as this summer.

At the same time, the VIX (volatility index) fell, signaling reduced fear of tighter financial conditions. Growth stocks and tech names outperformed, with hopes that lower rates will support further innovation and investment.

Expanded Section: The Dollar Under Pressure—Is the Strong Dollar Era Ending?

For much of the past year, the U.S. dollar has been strong, underpinned by higher rates, U.S. economic resilience, and its status as a global safe haven. Now, with the ADP disappointment and rising expectations of Fed cuts, the dollar slipped against a basket of major currencies. Investors are reducing dollar exposure as the rate advantage narrows, especially with Europe already starting its own rate-cutting cycle.

A weaker dollar could benefit U.S. exporters, but may also accelerate imported inflation by making imports and commodities more expensive. Currency market shifts also ripple through equities, bonds, and commodity prices—so every Fed move remains squarely in the spotlight for global investors and traders.

What’s Next? Will the Fed Blink and Cut Rates This Summer?

Most economists now see the door opening for a Fed rate cut this summer, especially if weak labor and economic data continue. Still, the Fed is unlikely to move hastily without further confirmation from upcoming reports, especially the official payrolls release. With inflation cooling and market pressure rising, the chances of easing have increased—but fears of “moving too soon” still weigh on policymakers.

The U.S. election, Trump’s rhetoric, and market dynamics all heighten the pressure on Powell and the FOMC. A scenario involving two or more rate cuts by year-end is now a central market expectation.

Conclusion: A Turning Point for Labor Markets—A New Opportunity for Investors

The May 2025 ADP report may prove a pivotal moment, signaling a transition from a strong to a slowing labor market. Markets are clearly betting on rate cuts, but the Fed, for now, is holding back. The answer will become clearer with more data—and especially with Powell’s response to rising political and market pressure.