A Well-Balanced US Labor Market

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.