Data Is Back—and It’s Booming: Steady Jobs and Services Reports Lower Chances for a December Fed Cut

After weeks of data scarcity due to the ongoing government shutdown, markets finally got a meaningful read on the U.S. economy through three key releases — ADP employment , ISM Services , and S&P Global Services PMI — and the message was clear: growth remains intact, inflation pressures persist, and the labor market continues to hold firm. Collectively, the reports painted a picture of moderate but resilient expansion that is likely to delay the Federal Reserve’s next rate cut, with December odds now down to 64.7% from 86% a month ago according to CME FedWatch data. Treasury yields rose, with the 10-year touching 4.14%, while the Dollar Index climbed back above 100 for the first time since May — a reaction consistent with economic strength rather than stress. The ADP National Employment Report surprised to the upside, showing a gain of 42,000 private-sector jobs in October, above the Reuters consensus forecast of +28,000 and reversing two months of negative readings. The improvement was led by hiring in education and healthcare (+26,000) and trade, transportation, and utilities (+47,000), while goods-producing industries added a modest +9,000. Offsetting those gains were losses in professional and business services (–15,000) and leisure and hospitality (–6,000), underscoring continued bifurcation between service sectors tied to necessity versus discretionary spending. Notably, pay growth remained flat at 4.5% year over year for job-stayers and 6.7% for job-changers — the same as September — a sign wage inflation has plateaued but not yet softened enough to satisfy doves inside the Fed. That combination of modest job growth and sticky pay reinforces the “soft landing” narrative rather than a slowdown. The ISM Services PMI echoed that resilience, rebounding strongly to 52.4 in October from 50.0 in September, beating consensus expectations of 50.7. The details showed a broad-based pickup: business activity jumped to 54.3 (from 49.9), and new orders surged to 56.2 — the strongest since October 2024. However, employment remained in contraction at 48.2, the fifth consecutive sub-50 reading, suggesting firms remain cautious about headcount even as demand improves. Prices paid, meanwhile, accelerated to 70.0, up from 69.4, marking the eleventh straight month above 60 and highlighting persistent input cost pressure, particularly from tariffs on manufactured and imported goods. ISM respondents cited steady consumer demand but also noted tariff-related cost inflation, supply-chain noise, and uncertainty from the federal shutdown. The overall tone suggested a services economy that is humming, not overheating — with solid demand and sticky inflation coexisting in an uneasy truce. The S&P Global Services PMI rounded out the trifecta with a reading of 54.8, slightly above September’s 54.2 but a touch below the 55.2 consensus estimate. That still represents healthy expansion and marks the thirty-third consecutive month above 50.0. The report showed a strong rise in new business and output, led by financial services and technology, with overall activity consistent with GDP growth around 2.5% annualized. Price data showed input costs remained elevated but grew at their slowest pace in six months, while output price inflation cooled to its lowest since April. This combination — moderating price pressures alongside strong growth — supports the notion of “good inflation,” where cost normalization is occurring gradually without choking off momentum. Still, business confidence slipped to a six-month low amid political uncertainty and tariff effects, a sign sentiment remains fragile despite the headline strength. Taken together, the data reinforce that the economy continues to expand at a moderate pace, powered by services resilience and stable consumer activity. Inflation remains uncomfortably high within service sectors, especially in wages and input costs, but there is little evidence of a demand collapse. For policymakers, this mix means there’s no urgency to cut rates in December. The market reaction reflects that recalibration: Fed funds futures now imply only about a two-thirds chance of a cut next month, down sharply from near-certainty in October. The rise in yields and dollar strength are not warning signs of policy error but rather confirmations that economic momentum is holding — a scenario that should ultimately support equities through earnings rather than rate speculation. In short, the long-awaited trio of reports provided clarity where the shutdown left a vacuum: the labor market remains healthy, growth is steady, and inflation is easing only gradually. That keeps the Fed firmly in a “higher-for-longer” stance, even as markets digest what may be the most balanced stretch of macro data since early summer. For now, investors can stop worrying about the economy’s pulse — it’s beating just fine. The challenge lies not in growth, but in patience: waiting for data soft enough to justify easing without questioning the strength that got us here.