Reports Show Improvement In Job Market

July 7, 2011

Two separate reports suggest that May's grim Labor Department Jobs Report was temporary.

According to CNN Money, payroll processing company Automatic Data Processing Inc. (ADP) reported that private sector employers added 157,000 jobs last month, a huge improvement over the meager figure reported by the Labor Department for the month of May. The figure was a surprise to economists who were expecting a gain of just 60,000 jobs.

The Wall Street Journal reported that small businesses, those that employ fewer than 50 workers, led the pack, hiring 88,000 new employees in June. Meanwhile, medium-size businesses added 59,000 employees and large businesses with 500 or more employees added 10,000 new jobs.

The ADP report does not reflect government employment numbers. According to Bloomberg, ADP gets data from about 340,000 companies with more than 21 million workers. Over the previous six reports, ADP and Labor Department figures were closest in February. ADP's estimates were least accurate in December. Still, The Wall Street Journal noted that the two reports usually follow the same patterns. Ian Shepherdson, economist at High Frequency Economics, expects the Labor Department's report, which will be released Friday morning, to reveal an increase of 200,000 private sector jobs and a loss of 25,000 government jobs.

Given the uptick in hiring, Shepherdson told The Wall Street Journal that he was convinced that the weakness seen in May was only temporary. Gary Butler, chief executive at ADP, agreed.

"Given such strong employment results despite poor GDP, I am optimistic we will see improving job growth in the second half of the year," Butler said to CNN Money.

In other good news, a separate report from the Labor Department showed that initial unemployment benefit claims dropped by 14,000 to 418,000 in the week ended July 2, which is the lowest level since mid-May. The figure was greatly affected by Minnesota's government shutdown, which forced some 2,500 state workers to file for unemployment.

Shepherdson cautioned CNN Money readers, saying that claims could continue to be volatile in the coming months.

"We'd love to argue that we're sure this is the start of a renewed downward trend [in claims]--and it might well be, but the impact of the annual auto retooling shutdowns mean we have to be very skeptical of the claims numbers for the next few weeks," he said.

According to The Wall Street Journal, economists say that week-to-week claims must be below 400,000 if the economy is going to generate enough jobs to put a dent in the unemployment rate. Claims have been above that threshold since early April.

Compiled by CityTownInfo.com Staff