Private payrolls grew by 188,000 jobs in June, payroll processing firm ADP reported Wednesday, which may signal a positive June jobs report from the Labor Department on Friday.
The figure came in above consensus estimates, which had been around 165,000 according to Bloomberg, and reflects broad-based employment growth across several industries. According to ADP data, the trade, transportation, and utilities industry added 43,000 jobs last month, and professional and business services grew by 40,000 jobs. Construction also posted solid growth, at 21,000 jobs, suggesting that a housing recovery may be benefiting the industry. Manufacturing, however, was flat, adding only 1,000 jobs.
The stronger-than-expected figure is evidence that the recovery is proceeding despite weights on job growth from Washington
"It's quite encouraging that the job market is navigating through the fiscal headwinds – I have to say quite gracefully," said Mark Zandi, chief economist at Moody's Analytics, which co-produces the report, in a Wednesday morning call with reporters. "I would have expected that by this time the fiscal headwinds of the tax increases and government spending cuts including the sequester would be doing more damage to the job market."
Based on ADP's 188,000 figure, Zandi estimates that Friday's June jobs report from the government will show employers to have added 175,000 jobs in June, as he expects the public sector to shed some jobs, bringing the total downward. Such a report would be a welcome surprise; consensus estimates for Friday's report are at 161,000, according to Bloomberg.
While 175,000 jobs may represent a healthy June labor market, it also represents a lack of acceleration in job growth. Trend job growth has been at around 175,000 per month for roughly two years, said Zandi. According to the Federal Reserve Bank of Atlanta, at that rate of growth (assuming the labor force participation rate doesn't budge), it would take nearly three years for the unemployment rate to even get back down to 6 percent, the upper end of what the Federal Reserve considers to be the long-run unemployment rate. Unless job creation accelerates, in other words, an already-long job recovery could be poised to go on a lot longer.