On Wednesday (September 2nd) during the Asian and European sessions, spot gold rebounded after hitting a low, rising from 4282 (-1%) to a flat 4334 before the ADP data release. Federal Reserve Chairman Kevin Warsh displayed a hawkish stance at the Jackson Hole symposium, explicitly linking the policy direction of the September FOMC meeting directly to the upcoming non-farm payroll (NFP) and CPI data. This data-dependent approach essentially wiped the slate clean of past months' slowdown in employment and downward revisions of data, focusing the entire picture on the latest, immediate indicators. As the most crucial leading indicator before the NFP data, the recently released August ADP employment report ("mini-nonfarm payroll") provided a critical signal: the growth rate of new jobs has slowed significantly, and the momentum of lower-level wages is deteriorating across the board. Meanwhile, Williams also expressed that current interest rates are appropriate amid the slowdown in ADP data, and while the continued productivity boom caused by AI will push up the neutral interest rate, sustained productivity growth has not yet been seen, supporting the outcome of the July FOMC meeting. This confirms Warsh's hawkish reasoning: productivity expansion has pushed up the neutral interest rate, but we must also respect the data, namely that we did not see productivity growth, so it was reasonable for the Fed to keep interest rates unchanged at its July meeting.

ADP's core data reveals a dual cooling trend in employment and wages.

The specific data released in this ADP report shows a cooling trend in both employment and wages: ADP employment growth: This period recorded 3.8%, not only far lower than the previous value of 4.4% and the market expectation of 4.8%, but also showing a rapid downward trend; All workers' wages growth: This period recorded +3.2%, a steady decrease of 0.1 percentage points from the previous month's +3.3%; Job-stayers' wages growth: This period recorded +3.0%, completely unchanged from the previous month's +3.0%, indicating that regular salary increases have been locked at a low level; Job-changers' wages growth: This period recorded +4.7%, a decrease of 0.1 percentage points from the previous month's +4.8%, showing that the premium for poaching is further narrowing.

A Deep Dive into Detailed Salary Data: Signals of a "Cooling Down" in the Labor Market

As ADP Chief Economist Nela Richardson stated, current hiring patterns can no longer be simply measured by traditional cycles. It's crucial to examine in depth which sectors are experiencing accelerated or slowed wage growth, and which groups are targeted. Previously predictable wage growth has been profoundly reshaped by complex factors such as demographic shifts, persistent inflation stickiness, and the structural substitution of employment by AI. Embedding this set of detailed wage data within the current macroeconomic context reveals three underlying logics: **Switching Premium Continues to Narrow (4.8%→4.7%):** During periods of an overheated labor market, companies primarily relied on high "switching premiums" to attract talent. The decline in the wage growth rate for job-hoppers to 4.7% indicates a significant reduction in companies' incentive to poach talent with high salaries. The shrinking switching premium is the most direct leading indicator of cooling labor demand, suggesting a decrease in workers' willingness to leave and a gradual stagnation in market liquidity. **Retention Wages Peak and Bottom (3.0%):** The wage growth rate for retained employees is locked at 3.0%, a figure essentially returning to the "non-inflationary wage growth range" most desired by the Federal Reserve before the pandemic. This means that the company's internal regular salary increase mechanism is fully under control, and there is no risk of secondary inflation caused by successive internal salary increases. The "wage-price" spiral is weakening (3.3% → 3.2%). Warsh's core concern in adhering to the 2% inflation target lies in the stubbornness of inflation in the service sector, which is largely driven by overall labor costs. The decline in overall employee salary growth to 3.2% directly breaks the cost support for service sector inflation, meaning that the sticky pressure transmitted from labor costs to the CPI is accelerating.

Forecast of August's official non-farm payrolls (NFP) and CPI

The across-the-board weakness in the ADP data has directly cooled down the surge in September rate hike expectations that had been fueled by Warsh's hawkish speech. Combining Warsh's "data-driven" approach, future non-farm payroll and CPI data will face the following restructuring: Based on the trends implied by the ADP data, future official data and the September policy meeting will be influenced by the following transmission: Regarding new job growth: ADP shows hiring momentum has fallen to 3.8%. Since wage slowdowns often precede hiring slowdowns, this means the upcoming official non-farm payroll data may also show weakness. If the non-farm payroll data is poor, the Fed will lack strong fundamental support to restart rate hikes, directly leading to a significant decrease in the probability of a September rate hike. Regarding year-on-year wage growth: Overall wage growth has fallen to 3.2%. This will directly impact the "average hourly wage growth (AHE)" in the official non-farm payroll report, putting it under significant downward pressure. This will not only significantly weaken inflation expectations but also undermine Warsh's core argument that "inflation is stubbornly sticky." Regarding inflation transmission (CPI): Limited wage growth directly suppresses residents' purchasing power at the consumer end, reducing the likelihood of a surge in core CPI. In the absence of supporting "hard inflation data," Warsh's hawkish interest rate hike logic will be completely undermined.

Walsh's "data dependence" and the ultimate direction of the "central government game"

Warsh's remarks at Jackson Hole were essentially an attempt to discard lagging data and establish a countermeasure by the Federal Reserve against the White House's fiscal easing (the Bessant Twist operation)—attempting to push up short-term interest rates through the threat of "rate hikes at any time" to offset the White House's de facto "watered-down rate cuts." However, data dependence is a double-edged sword: The breaking point of the hawkish logic: Warsh's tough stance is based on the premise that "past data is all ruined, and only the latest data in September is considered," and the latest non-farm payrolls and CPI must show signs of overheating. The constraint of real data: The across-the-board decline in ADP overall wage growth (3.2%) and job-hopping premium (4.7%) indicates that the underlying economic fundamentals are not as "hot" as Warsh assumed. If the subsequently released official non-farm payrolls for August also show weakness in both employment and hourly wage growth, Warsh's forced "rate hike optionality" will instantly lose its footing.

Summarize

The Federal Reserve can ignore past data revisions, but it cannot ignore the ongoing wage slowdown. The across-the-board weakening of the ADP report, from new job openings to job-hopping premiums, has put new reins on overheated expectations of interest rate hikes. In this "fiscal-central bank game" between the Fed and the White House, the final decision still rests firmly in the hands of the underlying labor market data. If the upcoming August non-farm payrolls and CPI figures further confirm the weakness revealed by the ADP, Warsh's hawkish pronouncements may only amount to "verbal intimidation," and remaining on hold will once again become the most realistic option for the Fed. Furthermore, because Warsh has been very hawkish before, but has repeatedly emphasized continuing to respect the data, regardless of his statements, he is essentially sticking to the data. Therefore, the ADP slowdown provides an excellent opportunity to participate in the recently overcorrected gold market. Moreover, if Warsh, knowing the data is weak, expresses a hawkish stance and emphasizes respect for the numbers, isn't this the most logical course of action after seeing the script? It paves the way for adhering to weakening labor market data in advance, clarifies the Fed's policy basis for respecting data, and maintains the Fed's independent image.