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Job Market May Be Gaining Some Traction, Reports Indicate

Source: WSJ - Kathleen Madigan

Posted on 07 Jul 2011

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According to a report released on Thursday, private businesses added a stronger number of jobs in June than expected. What's more, in a separate report the number of U.S. workers claiming unemployment benefits dropped lastw week. These new job reports indicated that the labor market may be gaining some traction.

Private-sector jobs in the U.S. rose by 157,000 last month, according to a national employment report published by payroll giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers.

Economists surveyed by Dow Jones Newswires had expected ADP to report a job gain of just 95,000 last month. The May data were revised lower to show a rise of 36,000 versus the already meager 38,000 first reported.

The ADP report said "June's figures suggest that the economic recovery, which slipped in the spring, might have found new traction in early summer."

The ADP survey tallies only private-sector jobs, while the Bureau of Labor Statistics' nonfarm payroll data, to be released Friday, include government workers. In recent months, state and local governments have been laying off workers to close budget gaps.

Economists surveyed by Dow Jones Newswires expect total nonfarm payrolls rose by 108,000 in June, double the weak 54,000 reported in May. The ADP number may prompt forecasters to lift their Friday's payroll estimates.

The June unemployment rate is expected to remain at 9.1%.

The latest ADP report showed large businesses with 500 employees or more added only 10,000 new employees, and medium-size businesses added 59,000 workers in June. Small businesses that employ fewer than 50 workers hired 88,000 new workers.

Service-sector jobs increased by 130,000 in June, while factory jobs, which had fallen in May, rebounded by 24,000 in June.

ADP, of Roseland, N.J., says it processes payments of one in six U.S. workers, while Macroeconomic Advisers, based in St. Louis, is an economic-consulting firm.

Jobless Claims Decline

New claims for unemployment benefits dropped by 14,000 to a seasonally adjusted 418,000 in the week ended July 2, the Labor Department said Thursday.

Economists surveyed by Dow Jones Newswires had forecast a decline of 3,000 new claims.

The decline, which was the first in three weeks, could have been larger if not for a government shutdown in Minnesota that led to 2,500 state employees filing for benefits.

Still, a more reliable indicator of the labor market's recent performance, the four-week moving average of new claims, fell by only 3,000, to 424,750.

The favorable report didn't change the fact the jobs market is soft. Economists generally think the economy is adding more jobs than it is shedding once the weekly claims figure falls below 400,000. Claims have been above that level since the week that ended April 9.

The economy has slowed this year, restraining job creation. The Federal Reserve predicts the nation's unemployment rate will remain high through this year and into 2012. The Labor Department will release monthly data Friday on nonfarm payrolls, and economists think the report will show a gain of 108,000 jobs in June. Paltry job growth is slowing the economy's big engine, consumer spending, which has already suffered from high gasoline prices.

"The persistently elevated jobless claims readings point to continued softness in the labor market, and the other recent economic indicators have generally come in on the soft side," JPMorgan Chase economists said in a research note previewing Friday's payrolls data.

The Labor Department Thursday said the number of continuing unemployment benefit claims -- those drawn by workers for more than a week -- fell by 43,000 to 3,681,000 in the week ended June 25. Continuing claims are reported with a one-week lag.
The unemployment rate for workers with unemployment insurance slid to 2.9% in the week ending June 25, compared to the previous week's revised rate of 3.0%.

The state-by-state breakdown, which is also reported with a lag, showed the biggest drop in claims the week ended June 25 was in Pennsylvania, with a decrease of 4,974 due to fewer layoffs in the transportation, entertainment, and service industries. The largest increase in claims that week was in New Jersey -- 6,827.