The stock prices of ADP, Paychex, and ManpowerGroup sold off sharply last year as hiring cooled. Employers froze their headcounts as they assessed the impacts of Trump's tariffs and of AI technologies on their businesses (chart). On May 8, we wrote that the labor market was showing early signs of improvement and that employment-related stocks may have bottomed. So far, so good.
Employers now seem to have a clearer, more optimistic sense of the economic outlook. As a result, payroll employment growth has improved in recent months and should continue to do so. Employment-related stocks still have room to run in this scenario.
We expect the June employment report (released on Thursday) to show a gain of 188,000, matching the three-month average through May, with the unemployment rate remaining at 4.3%.
