A wave of U.S. economic data hits Wednesday, July 1, including the ADP National Employment Report for June, June construction spending, and the ISM Manufacturing PMI — the last major economic signals before Friday's more closely watched official nonfarm payrolls report.
The releases matter more than usual this cycle. New Fed Chair Kevin Warsh has struck a hawkish tone since taking over, and markets are pricing in the possibility of a rate hike as soon as September. Traders are parsing every data point for evidence the labor market and factory sector are resilient enough to justify tightening rather than the rate cuts many had expected earlier this year.
What happened
May's data set an unexpectedly strong bar. The ISM Manufacturing PMI jumped to 54 in May from 52.7, beating forecasts of 53 and marking the strongest factory-sector expansion since May 2022. New orders climbed to 56.8, production rose to 54.3 and backlogs increased to 52.2, while the employment sub-index contracted less than the prior month, at 48.6 versus 46.4. Price pressures stayed elevated at 82.1, though down from April's 84.6 — survey respondents cited the Iran war in 42% of comments and tariffs in 18%, with 57% flagging pricing volatility.
A separate, competing gauge — the S&P Global U.S. Manufacturing PMI — climbed to 55.7 in June from 55.1 in May, beating forecasts of 54.8 and hitting its highest level since May 2022. Production grew at its fastest pace since July 2021 on the back of the largest new-orders surge since April 2022. That report, however, flagged the sharpest drop in manufacturing employment since May 2020, a split signal that complicates the Fed's read on labor-market strength heading into Wednesday's ADP print.
Why it matters
The ADP report, produced by the ADP Research Institute with the Stanford Digital Economy Lab, tracks payroll data from more than 500,000 companies and 26 million-plus employees. May's release showed eight of ten supersectors adding jobs, and market forecasts heading into June's print had clustered around a 110,000-to-120,000 range for private payroll gains, a level economists generally view as consistent with a still-solid but gradually cooling labor market.
Market impact
General Mills also reports earnings Wednesday, adding a consumer-spending data point to the day's macro releases. Despite Warsh's hawkish rhetoric, a Reuters poll found 72 of 102 economists expect the Fed to hold rates steady for the remainder of 2026, citing persistent inflation alongside labor data that, while cooling, hasn't cracked. A stronger-than-expected ISM or ADP print Wednesday would add fuel to rate-hike bets ahead of Friday's payrolls report; a miss would reinforce the majority view that the Fed stays on hold.