In a report Wednesday, employment consulting firm ADP estimated that the private sector added 188,000 jobs in June, up significantly from the previous month and higher than many analysts had predicted. Mark Zandi, chief economist for Moody’s Analytics, which calculates the report, said the gains are particularly notable in the face of significant federal government spending cuts.
“The job market is navigating through the fiscal head winds, I have to say, quite gracefully,” he said.
Also Wednesday, a weekly government tally of the number of people claiming unemployment benefits for the first time inched down to 343,000. Four years ago, that number was more than 600,000.
“This suggests that the layoff side of the labor equation remains on a solid footing, allowing any additional job gains to more easily translate to labor market slack absorption,” Gennadiy Goldberg, U.S. strategist at TD Securities, wrote in a client note.
Analysts expect that the government’s report on Friday will show the economy added 160,000 jobs and the unemployment rate dipped to 7.5 percent. That pace would be in line with previous months and indicate continued, but slow, economic expansion.
But the ADP report and weekly claims data suggest those figures may be conservative. In addition, an index compiled by Gallup showed that job creation the past two months has been at the highest level since April 2008. The research group also found that more part-time workers are finding full-time jobs. That has helped increase the percentage of the population that is employed. Economists have worried that many workers have become so discouraged by the job market that they have dropped out of the labor force altogether.
Zandi noted that the job gains measured by ADP were broad-based. Construction employment, for example, rose by 21,000 as the housing market continues to heal. Improvement in that sector has also spilled over into the auto industry, which reported this week that June sales came close to an annual rate of 16 million vehicles — a level not seen since before the recession. Much of the demand is for trucks, which are closely linked to construction and housing.
Not all the data released this week were rosy, however. A survey by the National Federation of Independent Business found that hiring among small firms was essentially flat. The group blamed uncertainty over the new health-care law and other policies for the lackluster results.
“We only have to look to Washington for reasons why our economy can’t seem to maintain steam and is on a painfully slow journey towards job creation,” said William C. Dunkelberg, NFIB chief economist.
The pace of recovery in the labor market also could have significant implications for monetary policy. The Federal Reserve expects to begin scaling back its massive stimulus program later this year if the recovery continues apace. It has tentatively planned to end the program when the unemployment rate hits 7 percent, which is expected to happen in the middle of next year.
However, Fed officials cautioned that the timeline would be contingent on the health of the economy.
“They’re kind of greasing the skids, prepping the markets,” said Alan MacEachin, chief economist at Navy Federal Credit Union.
The Fed’s comments prompted a sell-off in both stocks and bonds markets, while interest rates spiked. The yield on 10-year Treasurys, which serve as a benchmark for many interest rates, has since moderated to 2.5 percent. Still, it is about half a percentage point higher than it was in May.