Employment in the private sector increased by 201,000 from July to August, according to payroll giant ADP’s National Employment Report, beating analyst expectations.
In another good sign for the economy, ADP revised upward the estimated gain from June to July from an initial estimate of 163,000 to 173,000 jobs added (see ADP Finds Private Sector Added 163,000 Jobs in July).
In August, ADP found that small businesses with less than 50 employees added 99,000 jobs, including 92,000 jobs in the service-providing sector and 7,000 jobs in the goods-producing sector. Midsize businesses with between 50 and 499 employees gained 86,000 jobs, while large businesses with 500 employees or more added 16,000 jobs.
Overall, the service sector added 185,000 jobs in August, while the goods-producing sector added 16,000.
The financial services sector added 8,000 jobs in August, the 13th consecutive monthly gain. Manufacturing employment increased by 3,000, following an increase of 6,000 in July. Construction employment rose for the third consecutive month, adding 10,000 jobs, the biggest increase since March.
The job gains could spell good news for the Obama administration, especially if the official government job numbers that are released Friday by the U.S. Bureau of Labor Statistics show similar gains and perhaps even a dip in the unemployment rate. Republican strategists have predicted that a poor showing on Friday’s jobs report could blunt the impact of President Obama’s acceptance speech Thursday night at the Democratic National Convention.
“This is an encouraging number,” said Joel Prakken, chairman of Macroeconomic Advisers, which compiles the monthly employment reports with ADP, during a conference call with reporters Thursday. “It could be consistent with a slight decline in the national unemployment rate to be reported tomorrow morning. But even increases of 201,000 a month, while heading in the right direction, are really not adequate to put unemployment on a sustained downward track, particularly if there is an eventual cyclical recovery in the labor force participation rate. While I’m encouraged by today’s number and the direction it’s heading, there still is a very long way to go before we would characterize labor markets as substantially healed. There’s just a way to go here.”
He noted that employment in the next several quarters may be affected by other economic factors such as the drought out west, the debt problems in the Eurozone, and the looming "fiscal cliff" in Washington with taxes set to rise dramatically and sharp spending cuts scheduled to take effect. Macroeconomic Advisers predicts growth in gross domestic product of only 2 percent in the second half of this year and the first half of next year. Lower crop yields from the drought are likely to decrease GDP next year by about half a percentage point.
“That’s just not enough to generate robust gains in employment if there’s any kind of increase in productivity over that period,” said Prakken. “Given our macroeconomic forecasts here, we’re not looking for a further sharp acceleration in employment over the next several months.”