Private sector employers added 200,000 jobs from June to July, with the job gains distributed across all sizes of businesses and in many industries, including professional and business services.
In addition, ADP revised its job gains in June upward from 188,000 to 198,000 (see ADP Finds Private Sector Added 188,000 Jobs in June).
For July, ADP found that small businesses with one to 19 employees added 51,000 jobs, while those with between 20 and 49 employees added 31,000 jobs.
Midsize businesses with between 50 and 499 employees added 60,000 employees. Large businesses with between 500 and 999 employees added 7,000 jobs, while those with 1,000 employees or more added 50,000 jobs.
The goods-producing sector added 22,000 jobs in July, while the service-providing sector added 177,000 jobs.
Professional and business services, which include accounting and tax preparation, along with other services, added 49,000 jobs in July. The financial activities sector added 4,000 jobs, while the construction industry added 22,000 jobs. The combined trade, transportation and utilities sector added 45,000 jobs. However, the manufacturing industry lost 5,000 jobs in July.
“The ADP number was a strong number, a solid number, with 200,000 jobs created in the month of July,” said Mark Zandi, chief economist with Moody’s Analytics, which compiles the monthly employment report with ADP. “That’s very consistent with the job growth we’ve been getting over the past 24 months. Over that period, job growth has averaged almost exactly 200,000 jobs per month.”
Zandi noted that job growth in July was broad-based across most industries. However, the ADP figures point to some weakness in manufacturing, in part due to cuts in defense spending as a result of the budget sequester in Washington, in addition to weak overseas growth crimping exports. The inventory cycle has also weighed down manufacturing job growth, but Zandi predicted that would prove to be temporary. He noted, however, that job growth was consistently strong and solid across industries in July.
“One very good piece of news in the industry employment data was the solid gain in construction jobs, with over 20,000 jobs created during the month,” he added, noting that he expects more construction growth as homebuilding ramps up over the next two to three years.
The latest ADP numbers do not indicate that either tax increases or health care reform are having a significant impact on jobs, although worries about health care reform requirements appeared to dampen employment in the spring at companies with just under 50 employees. That trend appears to have evaporated over the summer, according to Zandi. He does not think this is because of the recent delay in the employer mandate.
“The delay gives employers more time to adjust to the health care rules, but I’m not sure that would have a very large impact that fast,” he said. If there is any impact from the delay, it might show up sometime next year in the job figures, he added.
Zandi is seeing job growth across all sizes of businesses, including small businesses, which had been lagging in the recovery until recently. However, much of the job growth in recent years has been in lower-wage jobs in areas such as leisure and hospitality, retail trade, and professional and business services, as well as in relatively high-paying jobs. “The real problem is that job growth has been weak in middle-paying jobs, those that are very pertinent to middle-income households,” said Zandi. “That goes to the job losses we are experiencing in manufacturing and the government job losses.”
The increase of jobs in professional and business services could have come in a variety of different types of services besides accounting and tax.
“One thing to note about professional and business service is that it’s a mélange of lots of disparate industries,” said Zandi. “As a result, it’s kind of difficult to draw strong conclusions about what’s going on, just because it encompasses so many different activities, but I think it’s fair to say in general it’s a sign of strength that we’re seeing this kind of job growth in such a wide range of economic activity.”