ADP Finds Private Sector Added 281,000 Jobs in June

Private sector employment increased by 281,000 jobs in June, showing signs of a strengthening economy, according to payroll giant ADP’s monthly national employment report.

Gains were widespread across various industry sectors and company sizes. Small businesses with one to 19 employees added 66,000 jobs, while those with between 20 and 49 employees added 51,000 jobs. Midsize businesses with between 50 and 499 employees gained 115,000 jobs. Large businesses with between 500 and 999 employees added 16,000 jobs, while larger companies with 1,000 employees or more gained 32,000 jobs.

The goods-producing sector increased by 51,000 jobs overall, while the service sector produced 230,000 jobs.

Of the various industry sectors, professional and business services, which include accounting, tax and other services, added 77,000 jobs. The financial activities sector gained 11,000 jobs. The construction industry added 36,000 jobs, while the manufacturing industry added 12,000. The combined trade, transportation and utilities sector increased by 50,000 jobs.

“Every industry experienced an increase in employment,” said Mark Zandi, chief economist at Moody’s Analytics, which compiles the monthly national employment report with ADP. “The gains were strong in construction and manufacturing. We saw growth in financial services, which has been lagging. The sectors that had been adding continued to add, in education, health services, leisure and hospitality. Every industry added to payrolls. The gains were also broad based across company sizes.”

Zandi pointed in particular to encouraging signs at small businesses. “I think the most recent good news is the strength that we’re observing among smaller businesses,” he said in a conference call with reporters Wednesday. “They seem to have kicked into a higher gear over the last 18 to 24 months, and in the last few months, they’ve been adding at a very, very strong pace. Part of that may be related to the improvement with the construction sector. Small businesses are tied more closely to construction activity, housing and commercial real estate. Large companies do as well, but small companies to a greater degree, a higher proportion of small businesses participate in construction activity in one form or another.”

Zandi noted that the credit environment has also improved for smaller businesses. “If you go back two, three, four years ago, it was very difficult for small businesses to get credit,” he said. “Now that’s no longer the case. If you look at lending by banks to small business, it’s growing robustly, at a double-digit pace. Since the end of last year, the pace of lending to small businesses has been very, very strong with acceleration in lending growth, and I think that augurs well for small businesses.”

Zandi acknowledged that there have been ups and downs in the monthly employment numbers of late, with the gains in May on the soft side, at around 170,000 and in June on the high side at 280,000 (see ADP Finds Private Sector Added 179,000 Jobs in May). “My sense, looking at a lot of data, is the reality is somewhere between the two, that the monthly job growth is probably around 225,000 per month,” he said. “It doesn’t mean we won’t have months above that or below that. It’s just that it’s the underlying trend. That is a healthy pace of job growth. In a typical normal economy, that would be double the pace of job growth necessary to maintain a stable rate of unemployment, so at this pace of job growth, the labor market is going to tighten. Unemployment will decline. We’ll get more people who are out of the labor force back into the labor force. We’ll start to work off some of the people who are working part time because they can’t find full-time jobs. There’s still a lot of slack in the labor market, but we’re working that down pretty quickly, and at this pace of job growth, we’re going to get back to full employment probably sometime in in late 2016.”

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