ADP Jobs Estimate: Better Than Expected, But Not Great

Payroll firm says the private sector added 162,000 jobs last month.

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The economy added 162,000 private, nonfarm jobs in September, according to payroll processing firm ADP.

The data show growth across the economy, in both the service-providing and goods-producing sectors, and across small, medium, and large firms. The figure suggests that Friday's jobs report from the Labor Department could be better than expected.

"This is indeed an encouraging kind of number today if it's borne out by the official data later in the week." said Joel Prakken, chairman of the firm Macroeconomic Advisers, during a call with reporters today.

Prakken points to the fact that today's figure beat consensus estimates, which had come in at around 140,000. It also tops consensus estimates for Friday's jobs figure, which predict about 113,000 new jobs, according to Bloomberg. In August, the economy only added 96,000 nonfarm jobs, according to the Labor Department.

Though the number is positive, Prakken says that it's not exactly a figure to celebrate.

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"It's hardly a strong number, and it's only barely above the pace that would push the national unemployment rate down," he says.

In addition, ADP's estimate only includes private payrolls. The Labor Department's estimate includes government employment as well, which has subtracted small numbers of jobs from the economy every month since March.

Prakken estimates that September's unemployment rate will remain either unchanged or will tick downward slightly. Looking ahead, Prakken points to a number of factors in coming quarters that could make for slower GDP growth, and thus slower job growth. The lingering effects of this summer's drought could bring down economic output for the second half of this year, and there is the potential for congressional action — or inaction — on the fiscal cliff to drag down growth as well.

"We are looking at a new dose of fiscal drag, even if we don't jump off the highest bluff along the so-called fiscal cliff" of spending cuts and expiring tax cuts, says Prakken.

Though Congress may avert some of those major changes, the expiration of the payroll tax cut, which now seems increasingly likely, could mean less spending money for Americans, and thus a slower economy.

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While ADP's assessment paints a rosier picture for the job market than it did last month, the labor market worsened by another estimate released this morning. Gallup reported today that its job creation index declined in September. That figure measures the difference between the percentage of workers who say their employers are hiring and the percentage who say their employers are letting workers go. Last month, it fell from +23 to +21 for non-government workers.

Uncertainty from both domestic fiscal issues and economic troubles in China and Europe may mean that those employers will not be quick to boost their payrolls anytime soon, experts say.

Danielle Kurtzleben is a business and economics reporter for U.S. News & World Report. Connect with her on Twitter @titonka or via E-mail at dkurtzleben@usnews.com.