ADP Finds Private Sector Added 163,000 Jobs in July

Employment in the private sector increased by 163,000 in July, with gains in businesses of all sizes, according to payroll giant ADP.

ADP reported Wednesday that small businesses with less than 50 employees added 67,000 jobs, while midsize businesses with between 50 and 499 employees added 67,000 jobs, and large businesses with over 500 employees added 23,000 jobs.

The goods producing sector accounted for 15,000 jobs, while the service-providing sector added 148,000 positions.

The financial services sector added 9,000 jobs, marking the 12th consecutive monthly gain. Manufacturing employment rose 6,000, following a revised increase of 9,000 in June. Construction employment also increased for the second consecutive month, adding 5,000 jobs.

Among the 73,000 jobs created in small businesses, the goods-producing sector added 4,000 jobs, and the service-providing sector added 69,000 jobs.

ADP revised down slightly the estimated gain from May to June, from the initial estimate of 176,000 to a revised estimate of 172,000 jobs.

Overall, the July numbers were better than expected and the 163,000 total was well above the consensus forecast among market analysts of 100,000 jobs, which is similar to the forecast for Friday’s official jobs numbers from the U.S. Bureau of Labor Statistics.

“For this part of the recovery, and given how far away we are from full employment, the best thing you can say about this number is it’s positive,” said Joel Prakken, chairman of Macroeconomic Advisers, which compiles the monthly employment report with ADP. “But we really need to see monthly gains in employment that are far larger than this to be consistent with a robust economic recovery in the labor market and a robust recovery in the economy. We need to put back to work 5 to 7 million more people over the next four to five years to get back to full employment in the middle part of the coming decade. In order to do that, we need to see monthly increases in jobs that are two to three times greater than this for a period of months at the very least to get us headed in the right direction.”

Prakken noted that there are many headwinds in the economy right now, including the legacy of the financial crisis, excess inventory in the housing market, concerns about the expiring tax cuts and “fiscal cliff” at the end of the year, and continuing worries about the euro zone. The employment increase of 9,000 in the financial services sector would be accelerated by an improvement in the housing market, which is showing modest signs of recovery in housing starts.

“The part of the finance sector that’s most troublesome right now is mortgage finance,” said Prakken. “We have not replaced the mortgage finance model that collapsed three years go with an alternative that has credit flowing nicely and on reasonable terms to qualified buyers. That’s one of the headwinds related to the housing sector that we have to deal with. I think we’re inching in that direction.”

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