ADP Finds Private Sector Added 179,000 Jobs in July

Private sector employers added 179,000 more jobs to their payrolls in July, according to payroll giant ADP, in another sign of a steadily strengthening economy despite recent indications of tepid growth.

ADP found that small businesses with 49 employees or less added 61,000 jobs in July, down from 86,000 in June. July’s total included 22,000 jobs in businesses with between one and 19 employees, and 39,000 in businesses with between 20 and 49 employees.

Midsize businesses with between 50 and 499 employees gained 68,000 jobs in July, up from 56,000 in June. Large businesses with 500 or more employees added 50,000 jobs in July, up from 34,000 in June. July’s total included 16,000 at companies with between 500 and 999 employees and 33,000 at companies with 1,000 employees or more.

The service sector gained 185,000 jobs in July, down from 203,000 in June. The professional and business services sector, which includes accounting and tax along with other types of services, contributed 59,000 jobs in July, down from 78,000 in June.

“I don’t view that as a material slowing in growth,” said Mark Zandi, chief economist at Moody’s Analytics, which compiles the monthly national employment report with ADP. “That 59K is strong, and 78K is boom-like. It could be timing issues or seasonal adjustment issues. I don’t think there’s been any material slowing in the professional and business services sector. It feels like the job growth in that sector is broad-based. Professional and business services are a mélange of different activities, everything from accounting to legal to temporary help. It’s just a potpourri, so there are a lot of cross currents, but in general I don’t see any material weakening. If there’s a sector that might start feeling the effects of a tight labor market and the ability to find qualified workers, this might be one of those sectors, so we might start seeing job growth slow, but I’m not sure there’s less demand from businesses. It’s probably because there’s less supply of labor. It’s going to be harder and harder to find these workers. I don’t think we’re there yet, but that’s something to watch.”

The combined trade, transportation and utilities sector added 27,000 jobs in July, down from 41,000 jobs in June. The financial activities sector contributed 11,000 jobs, following a gain of 9,000 jobs in June.

The goods-producing sector declined by 6,000 jobs in July, following losses in June of 28,000 jobs. The construction industry lost 6,000 jobs in June, following losses of 4,000 jobs in June. However, the manufacturing industry gained 4,000 jobs in July after losing 15,000 jobs in June.

Overall, Zandi sees positive signs in the job numbers, and he predicts that official job numbers that come out Friday from the U.S. Bureau of Labor Statistics for both the private and public sectors will be around 189,000 jobs. He acknowledged the number will be a bit less than the roughly 200,000 jobs that have been added each month since the start of the economic recovery. “Job growth appears to be throttling back,” he said during a conference call with reporters Wednesday. “That’s indicative of a job market that’s closer to full employment. Businesses are now having a more difficult time filling open job positions.”

He blamed the recent tepid GDP growth of around 1 percent in the first half of the year on two main factors: a slowdown in inventory accumulation by businesses and a collapse in energy-related and commodity-related types of investment. He predicts both of those factors will turn around in the second half of the year, and GDP will be around 3 percent in the second half of the year, or about 2 percent for the full year. He expects to see the Federal Reserve resume raising interest rates around the end of this year and on a more regular basis next year.