ADP report shows anemic private-sector job growth

In one of the most reliable early indicators of job growth, ADP released its monthly employment report yesterday, and the news continues to disappoint.  The private sector grew by 42,000, according to the payroll giant’s estimations, which is better than June’s revised 19,000, but still far below the growth needed to keep up with population growth.  For the first time in months, the manufacturing sector lost ground:

Nonfarm private employment increased 42,000 from June to July 2010 on a seasonally adjusted basis, according to the ADP National Employment Report®. The estimated change of employment from May to June was revised up slightly, from the previously reported increase of 13,000 to an increase of 19,000.

July’s rise in private employment was the sixth consecutive monthly gain. However, over those six months increases have averaged a modest 37,000, with no evidence of acceleration. …

July’s ADP Report estimates nonfarm private employment in the service-providing sector rose by 63,000. Employment in the goods-producing sector declined 21,000 during July while employment in the manufacturing sector decreased 6,000, the first decrease in six months.

Large businesses, defined as those with 500 or more workers, saw employment remain flat and employment among medium-size businesses, defined as those with between 50 and 499 workers increased by 21,000. Employment among small-size businesses, defined as those with fewer than 50 workers, increased by 21,000 in July.

American population growth creates around 100,000 working-age adults every month, on average.  The economy has to produce at least that many jobs to keep up with the expanding numbers.  In the past three years, we have had only one month in which the private sector has managed to do that, in March of this year, when 224,000 private-sector jobs were created.

The hit on manufacturing was predictable, given the turndown seen in the last two months.  Demand has fallen and inventories have risen, which means that manufacturers have to slow down in the short term.  Construction also fell, although by the smallest amount in more than two years.  We may be reaching the bottom on construction, although the recent sharp declines in residential sales may move the bottom even lower.

Bear in mind that this data does not include the public sector.  The mass layoffs of Census Bureau temps will come out in tomorrow’s report, and that could offset the minor private-sector gains suggested by ADP’s data.  According to, the consensus for private-sector jobs will be between +70K – +83K, but the consensus on overall numbers will be sharply negative — between -87K and -125K.  I’d guess lower on each, perhaps +50K on the private sector and -150K overall.   In any case, the numbers will not help build confidence in the Obama administration’s approach to economics.

And as if to underscore this, initial jobless claims hit a four-month high:

In the week ending July 31, the advance figure for seasonally adjusted initial claims was 479,000, an increase of 19,000 from the previous week’s revised figure of 460,000. The 4-week moving average was 458,500, an increase of 5,250 from the previous week’s revised average of 453,250.

The advance seasonally adjusted insured unemployment rate was 3.6 percent for the week ending July 24, unchanged from the prior week’s unrevised rate of 3.6 percent.

The advance number for seasonally adjusted insured unemployment during the week ending July 24 was 4,537,000, a decrease of 34,000 from the preceding week’s revised level of 4,571,000. The 4-week moving average was 4,575,500, an increase of 25,750 from the preceding week’s revised average of 4,549,750.

The 479,000 level is the highest since April 1oth, when it hit 484,000.  It’s still within a remarkably narrow band for the entire year, showing that job destruction continues, and that means bad news for the White House in tomorrow’s report.

Update: The AP uses its favorite adverb again:

New U.S. claims for unemployment benefits unexpectedly rose last week, government data showed on Thursday, underscoring a weak labor market and the fragile economic recovery.

The Labor Department says new claims for unemployment insurance rose by 19,000 to a seasonally adjusted 479,000. Analysts had expected a small drop. Claims have risen twice in the past three weeks.