Private Employment Sees Surprising Rise, Despite Some Questions

Posted by Dave Dorman

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August 3, 2012

While the U.S. is still taking some halting steps along the road to recovery, the employment picture continues to look strong for the private sector. While President Barack Obama took some flak for saying the economy was "doing fine," the latest report from Automatic Data Processing seems to back up his assessment that the private sector is seeing strong growth.

The ADP National Employment Report for July found that the private sector added a total of 163,000 jobs from June to July, well above most economists expectations. MarketWatch reports that most projections ranged around 120,000 jobs added, which would have been a major drop-off from the month before.

ADP did report a slight downward correction for June's numbers which fell to 172,000 from 176,000, but the trend of job gains still seems quite strong.

"This gain in private employment is strong enough to suggest that the national unemployment rate may have declined in July," Joel Prakken, chairman of Macroeconomic Advisers - the group that produces ADP’s report, told MarketWatch. "Today’s estimate from ADP, if re-enforced by a similar reading on employment … on Friday, will alleviate concerns that the economy has slipped into a downturn," referring to the release of federal unemployment statistics.

According to The Associated Press, most predictions expect to see the unemployment rate stay roughly the same at 8.2 percent, despite an expected rise in the number of jobs added last month.

The biggest gainer last month was, without doubt, the service sector, which added 148,000 jobs, or nearly 91 percent of all gains. The remaining 15,000 jobs came from the goods-producing sector. All sizes of businesses added a substantial number of positions, but small and medium businesses grew far faster, adding 73,000 and 67,000 jobs, respectively.

As positive as these estimates could be for the U.S. economy, however, some analysts noted that they might prove to be somewhat off-base. Eric Green, global head of research for rates and foreign exchange at TD securities, told MarketWatch that ADP's reports often over- or underestimate employment gains depending on the prevailing market conditions.

This poses a mixed situation for staffing and recruiting, since the private sector seems to be growing and adding jobs, but the U.S. Federal Reserve acknowledged yesterday that the country has slowed slightly since the start of the year. Since the Fed does not plan to offer any kind of stimulus, staffing groups will need to hope for a positive federal employment report.