ADP: U.S. Private Sector Job Growth Up More Than Expected In July

by Ike Obudulu Last updated on August 9th, 2019,

A report released by payroll processor ADP on Wednesday showed private sector employment in the U.S. increased by slightly more than anticipated in the month of July.

ADP said private sector employment climbed by 156,000 jobs in July after rising by an upwardly revised 112,000 jobs in June.

Economists had expected employment to increase by 150,000 jobs compared to the addition of 102,000 jobs originally reported for the previous month.

The report said employment in the service-providing sector jumped by 146,000 jobs, while employment in the goods-producing sector inched up by 9,000 jobs.

While ADP also said employment at large and mid-sized businesses rose by 78,000 jobs and 67,000 jobs, respectively, employment at small businesses crept up by just 11,000 jobs.

“Job growth is healthy, but steadily slowing,” said Mark Zandi, chief economist of Moody’s Analytics. “Small businesses are suffering the brunt of the slowdown.”

He added, “Hampering job growth are labor shortages, layoffs at bricks-and-mortar retailers, and fallout from weaker global trade.”

On Friday, the Labor Department is scheduled to release its more closely watched monthly jobs report, which includes both public and private sector jobs.

Employment is expected to climb by 165,000 jobs in July after jumping by 224,000 jobs in June, while the unemployment rate is expected to hold at 3.7 percent.

ADP and NFP

The ADP payroll report is the precursor to the Labor Department’s Employment Situation Report, colloquially known as Non-Farm Payrolls or just NFP which will be issued this Friday at 8:30 am EDT, 12:30 GMT.

This report provides a detailed analysis of the US labor market beginning with statistics on total US payrolls and additions. It separates the jobs numbers into myriad categories–private and government payrolls, type of employment, age, racial and gender differentiated unemployment rates and many others. The Bureau of Economic Analysis (BEA), a division of the Labor Department, tracks average hourly earnings monthly and annually, average work week (hours) and the labor force participation rate. The report gives the most comprehensive picture of the US labor market and is the best known and most widely traded US economic statistic.

There is a directional correlation between the private ADP figures and the overall US employment numbers. The two numbers generally move in the same direction each month though the amount of the rise or fall is not well correlated.

The February report was a good example. Non-farm payrolls dropped from 311,000 in January to 20,000 in February and ADP fell from 300,000 to 183,000.

ADP and NFP: Difference in degree

The report from ADP, released two days before the BEA statistics each month is a useful guide to the Labor Department numbers for the overall economy.

The main difference between the two reports is that ADP records just the hiring of its own clients, 411,000 US firms employing nearly 24 million workers. The BEA covers the entire US economy.

The BEA receives reports on actual hiring each month by firms of all sizes nationwide. It also estimates the number of jobs created by newly formed small businesses which are the largest source of employment growth. These positions have not yet been reported to the government. The government periodically adjusts the estimated number of positons by the actual figures resulting in annual revisions to the payroll numbers.

The BEA also includes government hiring and firing at the local, state and Federal level.

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