Steady job growth seen
Gains come from the housing recovery and an apparent pickup in small-business hiring.
New reports cite an apparent pickup in small-business hiring and gains from the housing recovery.
WASHINGTON — Private-sector hiring appears to be maintaining its middling pace, despite sluggish economic growth, retrenchment in federal payrolls and indications that some employers had been holding back because of the new health insurance mandate.
A pair of private industry reports released Wednesday suggested that Friday’s much-anticipated monthly jobs report is likely to show continued moderate gains, thanks in good part to the housing recovery and an apparent pickup in hiring at smaller businesses.
Automatic Data Processing Inc., the payroll processing firm, said its analysis of customers’ records indicated that private employers in the U.S. added a net 188,000 jobs in June across a broad spectrum of industries.
Separately, TrimTabs Investment Research, drawing from statistics on income tax deposits to the U.S. Treasury, estimated that employment overall grew by 182,000 last month.
If the official job-growth number from the Labor Department comes close to these two, the unemployment rate would most likely drop a notch, to 7.5%.
That has implications for monetary policy as it would nudge the Federal Reserve one more step toward tapering its bond-buying stimulus program later this year — a prospect that has unnerved investors.
Fed Chairman Ben S. Bernanke has said the central bank could stop buying bonds completely by mid-2014 should the economy improve and the jobless rate fall to about 7% by then.
But the Fed would not start to raise its benchmark short-term interest rate, which has been near zero since late 2008, until unemployment fell to 6.5%.
It’s hard to know how fast the unemployment rate will decline because that depends on both the level of net job additions and how many people flood back into the job market.
In May, the economy grew by 175,000 jobs, more than enough to absorb the natural increase in the labor force.
But the jobless rate actually edged up that month as droves of unemployed people jumped back into the labor market. Only those who actively seek work are counted as jobless.
Mark Zandi, chief economist at Moody’s Analytics who helped analyze the ADP report, said he was expecting weaker job-growth numbers from the ADP data, in part, because of the persistent federal spending cuts under the government sequester and the overall slow rate of growth in the U.S. economy.
Payroll employment in the last six months through May has been increasing on average by about 194,000 jobs a month — much greater than what one might expect given the meager 1¼% or so annualized growth rate in the overall economy for the last nine months.
Zandi said this GDP-job growth mismatch may be explained partly by stronger consumer and business confidence from higher stock prices and gains in the housing industry.
The ADP report Wednesday said construction businesses added a solid 21,000 jobs in June.
“The fingerprints of the housing recovery are being seen across the economy,” Zandi said in a conference call with reporters.
Moreover, company layoffs are at relatively low levels; new jobless claims, a measure of staff reductions, fell last week for the second straight week.
At the same time, economists at the Fed and elsewhere have gathered anecdotal evidence of some firms being reluctant to add staff because the healthcare law requires employers with more than 50 full-time workers to provide health insurance or pay a fine starting next year.
The Obama administration’s announcement Tuesday that the employer mandate would be delayed a full year until 2015 removes this restraint in the near term.
“For those employers on the cusp of the 50-employee threshold, this delay may prompt them to hire,” said economists at UBS Securities in a research note Wednesday.
“Additionally, employers may delay plans to cut back employee hours to keep them from being classified as ‘ full time.’” In the new healthcare law, full-time is defined as working 30 hours or more a week.
Still, analysts remain cautious about Friday’s employment report. In recent months ADP’s job-growth tallies have been smaller than the official numbers, which may mean that June’s stronger-than-expected ADP figure could have been inflated in a one-time catchup.
What’s more, changes in hiring patterns at small firms are notoriously difficult to capture accurately in a timely manner.
On average, analysts have projected job growth of about 165,000 in June and the unemployment rate edging down to 7.5%.