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Wednesday, August 1, 2012

ADP Report July 2012: 163,000 Jobs Added

ADP Numbers for July 2012:  Private sector jobs increase 163,000.  Does this portend decent jobs  numbers when the BLS releases its monthly report Friday?

ADP numbers also show 782,000 new private sector jobs since February 2012.

The monthly jobs report from the payroll processor ADP is usually seen as a bellweather of the national jobs report from the Bureau of Labor Statistics that  is released a couple of days later.  This morning's ADP report seems to indicate reasonable private-sector job growth.
Employment in the U.S. nonfarm private business sector increased by 163,000 from June to July, on a seasonally adjusted basis. The estimated gain from May to June was revised down slightly, from the initial estimate of 176,000 to 172,000
Employment in the private, service-providing sector expanded 148,000 in July after rising a revised 151,000 in June.  The private, goods-producing sector added 15,000 jobs in July.  Manufacturing employment rose 6,000 this month, following a revised increase of 9,000 in June.
When attempting to make any sense of this ADP report, here are a few things to consider:
  • This is an estimate based on ADP's survey of its payroll processing private-sector clients.  Over time, it moves in parallel with the government's BLS Establishment numbers, but it is not perfectly in synch with the government's numbers.  Also, the government reports may be more accurate in tallying small startups which may not be using a payroll processing service.  The ADP total numbers usually run about 300,000 to 600,000 lower than the BLS private jobs numbers in total jobs, not in increases or decreases of jobs.
  • To reiterate what I mentioned last month, one of the things that seems to be more prevalent recently is that the stock market moves up or down not in concert with any reports of job growth (we haven't had any decline in total private jobs in two years.), but in concert with reports of job growth compared to what the pundits THINK the reports should say.  This ADP report, if supported by BLS data, shows more job growth than the pundits expected, so stock futures turned positive after it was released.  
  • Headlines are often sensational and absurd. 

Small and medium service-providing companies add largest number of jobs.

The ADP report also shows that small (1-49 employees) and medium sized companies (50-499 employees) in the service-providing sector (vs. the manufacturing "goods-providing" sector) added the most jobs last month.  These segments were responsible for 132,000 of the 163,000 added jobs.  This has been the trend for many months now.  Since February 2012, small and medium service-providing firms have added 648,000 jobs, and large service-providing firms firms have added about 66,000 jobs.

Hiring in large goods-producing firms picks up a bit.

Small and medium goods-producing firms have continued to grow throughout 2012, but large goods-producing firms (with more than 500 employees) had been stagnant.  However, in the last month, hiring for large goods-producing firms has picked up a bit.  Small and medium goods-producing firms added an estimated 8,000 jobs last month (down from 18,000 the month before), and those small and medium goods-producing firms added 67,000 jobs total since February 2012.  Large goods-producing firms added 7,000 jobs this month, the best showing since February, but only 1,000 jobs since February 2012.

Continued turnaround in Construction and Manufacturing; Financial Services continues to add jobs.

This report shows a continued turnaround in jobs in both Construction and in Manufacturing.  Construction rose for the second month in a row, by 5,000 jobs in July, after declining for two months in the spring.  Manufacturing added 6,000 jobs in July and 15,000 new jobs in the last two months combined.

Financial services added 9,000 jobs last month.  This sector has now added jobs for 12 consecutive months.

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