June Jobs Market Gets a Jolt, Adds 176,000 Workers

ADP report shows private employment grew substantially in June.

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U.S. companies added substantially more jobs than expected in June, according to a new report, buoying hopes that the labor market might not be struggling as much as economists thought.

About 176,000 workers were added to company payrolls last month, according to estimates from the latest ADP National Employment Report. That's larger than the 136,000 jobs added in May and significantly more than the 100,000 or so economists predicted for June.

"The gain in private employment is strong enough to suggest that the national unemployment rate may have declined in June," said Joel Prakken, chairman of Macroeconomic Advisers (which produces the report for ADP), in a release.

But while Thursday's ADP numbers might be encouraging, all eyes and hopes are still on the Bureau of Labor's jobs report, scheduled to come out Friday. A good number would mean a better outlook for the labor market, boost consumer confidence, and give the economy a shot in the arm. A bad number could worsen already simmering fears that the U.S. economy is in for a rough ride in the second half of 2012.

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"Today's estimate, if reinforced by a comparable reading on employment from the Bureau of Labor Statistics tomorrow, likely will ease concerns that the economy is heading into a downturn," Prakken added.

The solid ADP report isn't the only indicator suggesting some improvement. Two other reports released Thursday bode well for the labor market as well. First-time unemployment claims fell to 374,000, down 14,000 from the previous week according to the Department of Labor's Employment and Training Administration. That's the biggest fall since April and the lowest number of claims since mid-May.

Layoffs fell to a 13-month low in June, as well, according to the outplacement firm Challenger, Gray & Christmas. U.S-based employers announced 37,551 job cuts during the month, which is down almost 40 percent from the cuts planned in May.

"Even with recent signs that the economy is headed for another summer slump or worse, including the first contraction in manufacturing activity in three years, employers appear reluctant to shed too many workers," said John A. Challenger, CEO of Challenger, Gray & Christmas, in a release.

Other experts don't have as rosy of an outlook, saying that despite an uptick in June employment numbers, most economic indicators are trending downward.

"What's important is the trend of the numbers and no matter what the [Bureau of Labor's] jobs number is, if you look at the economic reports—the manufacturing reports, the industrial reports—they're all weakening," says Lance Roberts, chief economist and investment strategist at Streettalk Advisors. "In terms of employment, corporations are the last to hire and the last to fire. It will take a few more months of weakening economic data before corporations start saying, 'I've got to protect my profit margin and start laying off people.'"

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"The trend in employment is negative, the trend in the economy is negative—that doesn't bode well for the next few months," he adds.

In that vein, Roberts and other economists are standing pat on their estimates private payrolls as reported by the government will increase between 50,000 and 70,000 jobs in June, leaving the unemployment rate unchanged at 8.2 percent.

"The ADP numbers should not be taken as gospel," warns Joel Naroff, president and chief economist at Naroff Economic Advisors. "There is little reason to think that the job market has suddenly turned robust."

But also leaving a little glimmer of hope for the months ahead, Naroff says: "There is now every reason to hope [the jobs market] has not fallen apart either."

Meg Handley is a business reporter for U.S. News & World Report. You can reach her at mhandley@usnews.com and follow her on Twitter.