ADP survey shows job growth, but economists remain skeptical

July 05. 2012 11:15AM


U.S. private-sector nonfarm employment grew by 176,000 jobs in June, according to national employment data released today by Roseland-based Automatic Data Processing, which revised its May numbers up slightly from the initial report of 133,000 to 136,000.

Joel Prakken, chairman of Macroeconomic Advisers LLC, which co-authors the monthly report with ADP, said June's job numbers show "a reacceleration following two months of tepid employment gains," but "in the second half of the year, our forecast is the economy is going to grow sluggishly."

"There's sure to be a fiscal drag when the payroll tax holiday expires … and potentially all of the (George Bush-era) tax cuts are allowed to sunset," Prakken said. "We'll muddle through employment and unemployment at least another half of a year or nine months to a full year. It won't be until late 2013 that the numbers will resemble a robust recovery."

Still, "Dissecting the results by size of payroll and firm, there's not a single negative number today," Prakken said. "No matter which way you look at this data, you see a rebound from the weak numbers posted in the spring."

The majority of the growth in June was on small and midsize payrolls, as companies with up to 49 employees added 93,000 jobs, and another 72,000 jobs were added on midsize payrolls. Companies with 500 or more employees continue to lag behind smaller firms in employment growth, adding only 11,000 jobs in June and 9,000 jobs in May, according to the report.

According to Naroff Economic Advisors Inc. President Joel Naroff, the U.S. economy "should be adding 300,000 jobs over a two-month period, so we should be adding 200,000 to 250,000 jobs in June just to get to that average," since the private sector only grew by 82,000 jobs in May.

"Part of the problem is every time the economy is poised to change gears, something else comes up," Naroff said. "It's hard to get strong growth until the housing market generates new sales and construction at a faster pace, but that's not gonna happen overnight. You can't have robust growth if Europe is in a recession … and if the financial sector is giving out loans through an eyedropper. Those are critical factors that no one has control over, so it will be at least another six to 12 months of this sluggish growth before we have a chance to see the economy begin to pick up speed."

Prakken said today's employment data is "enough to nudge the unemployment rate down," but with growth of the gross domestic product still below 2 percent, "unemployment will still be close to 8 percent at the end of the year."

The report's numbers — compiled by ADP using payroll records — include only private-sector jobs. Labor will release nonfarm payroll employment results, which include government employees, on Friday.


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