Private sector employment increased by 237,000 jobs last month, according to payroll giant ADP, in a sign of further strengthening in the economy.

Small businesses added 120,000 jobs in June, on par with May, including 71,000 at businesses with between one and 19 employees, and 49,000 at companies with between 20 and 49 employees.

Midsize businesses with between 50 and 499 employees added 86,000 jobs in June, up from 63,000 in May. Large businesses gained 32,000 jobs in June, up from 19,000 in May. Companies with between 500 and 999 employees bounced back with 27,000 jobs added, after shedding 1,000 jobs in May. Companies with 1,000 employees or more gained 5,000 jobs, down from 21,000 the previous month.

The service sector added 225,000 jobs in June, a significant rise from 192,000 in May. Professional and business services, which include accounting, tax and other types of services, contributed 61,000 jobs in June, nearly double the 32,000 jobs added in May. The combined trade, transportation and utilities sector grew by 50,000 in June, on par with May. The 19,000 jobs added in financial activities in June represented an increase from 12,000 in May.

Goods-producing employment rose by12,000 jobs in June, after adding 11,000 in May. The construction industry had another solid month in June, adding 19,000 jobs, but that was down from 28,000 in May. Manufacturing added 7,000 jobs in June, after losing 2,000 in May. Franchise jobs increased by 28,800 in June.

Mark Zandi, chief economist at Moody’s Analytics, which compiles the monthly national employment report with ADP, predicted that when the U.S. Bureau of Labor Statistics releases the official job numbers on Thursday for the public and private sectors, it will indicate approximately 250,000 jobs added in June.

“That is roughly the average monthly job growth we’ve experienced over the past two to three years, and that is a very heady pace of job growth,” Zandi said during a conference call with reporters Wednesday. “The job market is in full swing. At 250K, that’s roughly double the pace of job growth we need to absorb the growth in the working-age population. That means if unemployment and underemployment continue to decline, and if the current pace of job growth is sustained—which I think is likely—that means we’ll be back to full employment by this time next year.”

Zandi predicted that the BLS data on Thursday will indicate a pickup in wage growth to over 2 percent and headed toward 3 percent. He believes it will be over 3.5 percent by the end of 2016 once full employment is reached.

“That will be a catalyst for a marked change in people’s perceptions of the economy,” he added. “Even though the job market has been creating lots of jobs, people generally haven’t bought into the idea that the economy is doing well. It’s probably because their pay increases have been quite modest.”

He anticipates the Federal Reserve Board will decide to raise interest rates at the September meeting.
The only blemish in the job numbers are the losses in the energy sector due to oil prices, Zandi added.

“Since the beginning of the year, when it started, we’ve lost 60,000 jobs through May,” he said. “We probably lost another 10,000 to 15,000 in June. That takes us up to as high as 75,000, and I think it will probably come to an end with about 100,000 in job losses. We’re about three-fourths of the way through the adjustment to the lower oil prices in the energy sector.”

The global economy and the strong dollar are also having an impact on trade and the job numbers, particularly at large companies, according to Zandi.

“That’s reflected to some degree in the relatively weak growth we’re seeing at large companies, those with over 100,000 employees,” he said. “That’s where most of the action was in the early and middle part of the economic recovery, but in the last year or so, the big companies have been hiring, but at a much slower pace. I suspect that’s related to the fact that they were exposed to what’s happening globally.”

Fortunately, small companies have kicked into higher gear with their hiring. Zandi does not anticipate the Greek debt crisis to have a large impact on hiring in the U.S., as the main fallout will be in the European economy. Even the debt problems in Puerto Rico will not have a major impact in the U.S., he believes.

“The Puerto Rican situation is very idiosyncratic to Puerto Rico,” he said. “It’s well telegraphed and understood, and I don’t think it’s a surprise that it’s come to this in Puerto Rico. The fiscal situation in the United States for state and local governments could be better, and there are some states and localities that are struggling with fiscal problems. They’ve got longer-term problems with unfunded liabilities and pension liabilities, but broadly speaking their situation is quite good, and it’s actually improved significantly. If you look at revenue growth, for example, it has picked up quite nicely, particularly in states that rely on income taxes. They’ve returned quite strongly. I don’t think there are any states or significant municipalities that have credit issues that are nearly in the same league as the Puerto Rican situation, so I don’t think there will be any significant fallout in the U.S. muni market or the U.S. economy.”

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