Private Sector Jobs Up for July, Though Other Reports Suggest Stalling Economy

Payroll processor ADP says 114,000 private sector jobs were created in July, a number inline, if on the high side, with what economists expected.

All but 9,000 of the jobs were created by small and mid-size businesses employing up to 499 workers. The gain came in the service sector, which added 121,000 jobs during the month, according to ADP and its forecasting partner, Macroeconomic Advisers. The goods-producing sector lost 7,000 jobs, with manufacturing alone shedding 1,00o. Construction was down by 11,000, the third consecutive monthly decline.

Widely watched for clues as to what the U.S. Labor Department’s monthly employment report (out on the Friday after the ADP release) is likely to show, the ADP National Employment Report is often far off the official numbers.

In June, ADP estimated private sector job creation at 157,000, revised down to 145,000 in today’s release. The U.S. Bureau of Labor Statistics put the private sector number at 57,000. For May, ADP said 73,000 jobs were created; the BLS said 36,000. In April, ADP said 179,000 jobs were added; the BLS said 241,00.

Which is the more correct is open to debate. The BLS data about job creation is derived by sampling payroll data from some 140,000 businesses and governments each month. The numbers are revised in the two successive months after the initial report to account for additional data from an expanded sample. The ADP report is based on a sample of about 340,000 of its clients accounting for over 21 million U.S. employees and all private industrial sectors.

Regardless, government policymakers, investors, and others make decisions based on the BLS numbers, which stand as the official employment report. And while the month-to-month numbers proffered by ADP and the BLS may differ, the trends they show usually agree.

Indeed, today’s ADP report ominously notes, “… employment is decelerating. Since February, the three-month percent change has declined every month, from 0.60% then to 0.27% in July.”

In other words, ADP and Macroeconomic Advisers say economic growth is stalling, a conclusion supported by a variety of reports streaming out in the last week. GDP for the 2nd quarter came in at 1.3 percent; industrial growth in July was down, as measured by the Institute for Supply Management’s index, and this morning, the ISM said its index measuring the service sector also was down in July to 52.7, from 53.3 in June. It’s the weakest growth rate in 17 months.

Add to that another report this morning that said American consumers cut their spending in June by .2 percent from May. When adjusted to account for price increases, the actual decrease was almost imperceptible. However, Wall Street ignored the nuance, and reacted, instead to the downward trends evident in all the indicators. The markets are all lower. In early afternoon trading in New York, all the major indices were off significantly; the Dow was down 110 points.

Friday at 8:30 a.m. Washington time, the Labor Department will release its July employment report. The consensus among most surveys of economists is that the report will show 90,000 new, net jobs created in July. Some, however, predict a much lower number, as little as 55,000 jobs.