Employment in the private sector increased by 176,000 from May to June on a seasonally adjusted basis, according to the latest monthly employment report from payroll giant ADP, indicating that the recent slowdown in hiring may be reversing.
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In addition, ADP found that the estimated gain from April to May was revised up slightly, from the initial estimate of 133,000 to a revised estimate of 136,000.
Of the 176,000 jobs added in June, 93,000 were at small businesses of less than 50 employees. Midsize businesses with between 50 and 499 employees added 72,000 jobs, while large businesses with 500 employees or more added 11,000 jobs.
Joel Prakken, chairman of Macroeconomic Advisers, which compiles the monthly employment report with ADP, noted that the 176,000 figure was above analyst expectations for both Thursday’s ADP report and for Friday’s employment report from the U.S. Bureau of Labor Statistics.
“It was an upside surprise, which will be very encouraging if it’s validated or otherwise reinforced by tomorrow’s numbers from the BLS because it comes on the heels of a couple of months that had both economic forecasters and investors rattled,” he said. “An increase in employment of that magnitude would be enough, I think, to nudge the national unemployment rate down, which would also be encouraging.
“This re-acceleration is also consistent with the story that employment gains in the winter were unusually high because it was so warm and dry, with the payback in the spring months that we’re now emerging from, so I think there’s something there,” Prakken added. “With the data we have in hand now, it does appear that the economy slowed pretty sharply in the spring, so some of the slowdown in employment the last few months before this really did reflect a fundamental tempering of the pace of economic growth, probably related to unsettling developments out of the Eurozone—the sovereign debt and banking crisis—and maybe also some growing uncertainty about the course of fiscal policy in the United States around the turn of the year, with the so-called fiscal cliff approaching. But I’m very encouraged by today’s numbers, and I hope to see it reinforced or confirmed by tomorrow’s numbers. If it is, I’ll feel even more encouraged. But it is just one month’s data, and we never want to make too much or too little, I suppose, of just one’s month’s data.”
The financial services sector added 11,000 jobs from May to June. Construction employment rose by 8,000 jobs, more than reversing the declines of the two previous months. Prakken sees these numbers as confirmation that there has been a gradual recovery in employment in the financial industry after the “bloodletting during the housing collapse.” He said he wouldn’t expect the part of that sector related to mortgage financing to regain the frothy levels of 2007 and 2008, but he sees some good pickup there. Construction employment also appears to have bottomed out.
Most of the job gains last month came in the service-providing sector, which added 160,000 jobs, while the goods-producing sector added only a tenth of those jobs, at 16,000. Among small businesses, the service sector added 84,000 jobs, while the goods-producing sector added 9,000.
“In spite of lingering fiscal uncertainties, it is encouraging to see companies creating jobs, particularly in the goods-producing sector where we see positive growth following two months of job loss.” said ADP president and CEO Carlos A. Rodriguez in a statement. “Since January of this year, our National Employment Report shows that, on average, businesses have added 173,000 jobs a month. We hope this growth continues at even a healthier rate across all sectors of the economy.”