Senate on track to pass funding deal that could end government shutdown

Japan data earlier:

• Japan July data. Real wages +0.5% y/y. Household spending +1.4% y/y (exp 2.3%)

Boosting the prospect of a Bank of Japan rate hike:

• ING flags October BoJ hike on rising pay, sees politics and tariffs as key risks

Japan’s nominal wages rose 4.1% in July from a year earlier, accelerating from June’s revised 3.1% gain and beating economists’ 3% forecast, according to labour ministry data released Friday. It was the strongest increase since December.

Real cash earnings also turned positive for the first time in seven months, climbing 0.5% versus expectations for a 0.6% decline.

• “The results of this survey show that the domestic economy is at least positive,” said Kohei Okazaki, chief market economist at Nomura Securities.
• “This increases confidence that domestic demand will remain solid even if some external shocks occur going forward.”
• “Even if some of the increase is due to bonuses, the fact is that incomes are increasing,” Okazaki said. “I think we are beginning to see signs of wages increasing, albeit gradually, and linking this to consumption.”

This article was written by Eamonn Sheridan at investinglive.com.

The ADP data has diverged with the NFP many times in the past. We’ve seen countless times the market moving on the ADP data just to get caught on the wrong side by the NFP report a couple of days later. The last time that happened was in July when the ADP showed -33K jobs loss and the day later the NFP came out at +147K vs +110K expected.

After the latest revisions to the NFP data though, it looks like the ADP was the one showing the true trend in private payroll employment. You can see it better in the two pictures below (h/t @stevehou0 on X) showing the trend in NFP and ADP before and after revisions.

We can see that although the two are not perfectly correlated, the ADP has been more accurate in capturing the trend. In 2025, the labour market froze due to the tariffs mess of course, and the uptrend seen in the last part of 2024 turned into a downtrend due to uncertainty and growth fears.

That trend might turn around again given that the uncertainty from tariffs is now behind us and expectations for rate cuts could improve business activity.

Fed’s Waller on ADP

Another interesting fact is that Fed’s Waller yesterday mentioned the ADP data in his speech. Below you can read the excerpt:

I also look at timely data that Federal Reserve staff maintains in
collaboration with the employment services firm ADP to construct a
measure of weekly payroll employment, which covers about 20 percent of
the nation’s private workforce. This measure is comparable to the one
ADP publishes. The current May–July contour for the staff measure of
ADP-based private employment is broadly consistent with that of the
Current Employment Statistics numbers. And in the weeks after the July
jobs report’s reference period, preliminary estimates from ADP show
continued deterioration.

He said that the weekly payroll employment data that they construct from ADP continued to show deterioration after the July’s jobs report’s reference period.

To sum up

The ADP report next week might be the most important of the year as market participants will certainly pay even more attention to it after the latest findings. This might translate into big moves across the markets as traders position into the NFP report coming up the day after.

This article was written by Giuseppe Dellamotta at investinglive.com.