The United States ADP employment change 4-week average was 54.8K on 28 March. The previous figure was 39K.
This shows an increase of 15.8K in the 4-week average compared with the prior reading. The data refers to the ADP measure of employment change in the United States.
The recent ADP data, showing a jump in the 4-week average job gain to 54.8K, suggests the labor market is not cooling as quickly as anticipated. This resilience is a key signal for us, as it challenges the narrative of an imminent economic slowdown. It implies that underlying demand in the economy remains firm heading into the second quarter.
This stronger employment picture complicates the Federal Reserve’s path forward, especially with the last CPI report showing core inflation still hovering around 3.1%. We believe this data reduces the probability of a mid-year interest rate cut that many had been pricing in. The market may now need to adjust expectations for a “higher for longer” rate environment.
Given this, we see an opportunity in rising volatility, as the market digests this policy uncertainty. The VIX, currently sitting near 16, seems too low if the Fed is forced to maintain its restrictive stance longer than expected. We should consider buying front-month VIX call options or establishing long volatility positions through options on the SPY.
For equity indices, this sustained pressure from interest rates poses a headwind, particularly for growth and tech sectors. We should look at buying protective puts on the Nasdaq 100 via the QQQ ETF, or establishing bear put spreads to hedge against a potential downturn. This strategy offers downside protection while defining our maximum risk.
We need to remember the market’s reaction in mid-2025 when similar strong data delayed the Fed’s anticipated pivot, causing a rapid 5% pullback in the S&P 500. History suggests that the market often gets ahead of itself in pricing rate cuts. This current situation feels very similar to what we observed last year.
The next critical data points will be the official Non-Farm Payrolls report for April and the subsequent CPI release. These will either confirm this renewed strength or show the ADP report to be an outlier. Until then, we should position for continued uncertainty and the potential for a market repricing.
