Employers in the private sector added 91,000 jobs from July to August, according to payroll giant ADP.
However, that was a decrease from the 109,000 jobs added from June to July, a figure that was revised downward from the initially reported 114,000. ADP found that small businesses with less than 50 employees added 58,000 jobs, while midsized businesses with between 50 to 499 workers added 30,000 jobs, and large businesses with over 499 employees added 3,000 jobs.
The service sector added 80,000 jobs, while the goods-producing sector contributed 11,000 jobs in August. Among small businesses, the service-providing sector added 49,000 jobs, while the goods-producing sector added 9,000.
The addition of 91,000 jobs in August was roughly in line with the consensus forecast from analysts. However, the ADP figure does not include an estimate for government employment. The jobs numbers expected on Friday from the U.S. Bureau of Labor Statistics is likely to be much lower than ADP’s numbers, according to Joel Prakken, chairman of Macroeconomic Advisers, which compiles the reports with ADP. Government employment on the state and local level has been on the decline for some time, he pointed out, as governments make painful spending cuts to balance their budgets.
He noted that the ADP numbers also do not count striking workers as having lost a job because they generally remain on the payroll. Thus the Verizon strike is also likely to put a dent in the figures reported Friday by the federal government, with another 40,000 to 50,000 workers likely to be subtracted from the official employment figures.
“Friday’s number from the BLS could be a good deal weaker than the number we’re reporting today,” said Prakken. He added that reports that take into account the strike information could put August’s job gains at closer to zero.
As for ADP’s report, he noted, “this is an increase in employment, but it is tepid. It is a disappointment, but not surprising. Employment lags behind GDP, which has not grown a lot this year.”
He added that the uncertainty in Washington over the debt ceiling may have also contributed to the sluggish employment growth in August, along with the subsequent S&P downgrade of government debt, and the uncertainty in the Euro zone over the debt problems in some European countries. “Given that employment lags behind economic activity, with all the hullaballoo in August, we might have to wait another month to see all the fallout from what that might be,” said Prakken.
The deliberations of the “super committee” that will be meeting in Washington this fall to decide on further deficit reduction measures could add further uncertainty and weakness to the economy, especially if reports filter out about disagreements that may lead to deadlock and mandatory spending cuts.
Even the jobs program that President Obama is set to propose after Labor Day may not make much of a difference in unemployment. The administration reportedly has been considering a number of proposals, including tax credits for new hires, and an infrastructure bank to provide more spending on roads, bridges, and school construction.
“Our feeling is that some of these initiatives are worthwhile taking in their own right,” said Prakken. “Some infrastructure spending makes sense at the current low interest rates, and matching labor demand with labor supply might be helpful. You don’t want to raise taxes in a weak economy. But as to whether or not that has an effect on hiring, we came to the conclusion that this is essentially just nibbling around the edges. What’s really constraining hiring is that there just isn’t enough demand. Businesses are very reluctant to take on the commitment of a new hire without that demand, and there’s very little the federal government can do in the current political climate.”
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