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Private-sector payrolls grew modestly in July

Private-sector employers added 114,000 jobs in July, broadly matching economists’ expectations and signaling that perhaps Friday's jobs data won't be dire.
/ Source: staff and news service reports

Private-sector employers added 114,000 jobs in July, broadly matching economists’ expectations and perhaps alleviating some concerns about Friday’s monthly jobs report.

Economists surveyed by Reuters had forecast a gain of 100,000 jobs. June's private payrolls were revised down to an increase of 145,000 from the previously reported 157,000.

Joel Prakken, Chairman of Macroeconomic Advisers LLC, which jointly developed the report, told CNBC that the fact that the report came in “within spitting distance of estimates makes me feel okay, especially given recent downgrades in GDP growth.”

The ADP report is seen as a proxy for the government’s monthly employment report, due out Friday. The monthly jobs report is forecast to show the pace of job creation accelerated last month. The economy is expected to have gained 85,000 jobs, not enough to push the unemployment rate below its current 9.2 percent.

"It is mostly in line with expectations. It is encouraging that the number did not disappoint but it is still hard to be overly optimistic given the earlier report on layoffs from Challenger. On balance, investors are still nervous before Friday's broader payrolls data," Omer Esiner, chief market analyst with Commonwealth Foreign Exchange, told Reuters.

Some analysts pointed out, however, that the ADP report hasn't been in lockstep with the monthly Labor Department data recently.

"The track record of the ADP to predict the BLS payrolls figure has been close to dismal. If we view there is a relationship between ADP and the government's payroll survey, the relationship between the two has been completely broken," said Anthony Karydakis, senior U.S. economist at Commerzbank.

"There is no doubt that the recovery has stalled here. Something fundamentally is going on, not just the supply-chain disruption and the weather," he added.

Indeed, a separate report on U.S. employment, also released Wednesday, showed the number of planned layoffs at U.S. firms rose to a 16-month high in July as sectors which had been seeing fairly few layoffs unexpectedly bled jobs.

Employers announced 66,414 planned job cuts last month, up 60.3 percent from 41,432 in June, according to a report from consultants Challenger, Gray & Christmas, Inc.

July's job cuts also were up from the same time a year ago, rising 59.4 percent from the 41,676 job cuts announced in July 2010, and recording the largest monthly total since March, 2010.

"What may be most worrisome about the July surge is that the heaviest layoffs occurred in industries that, until now, have enjoyed relatively low job-cut levels," John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement.

Layoffs in the pharmaceutical and retail sectors overtook nonprofit and government job cuts last month, accounting for 20.32 percent and 16.93 percent of announcements respectively.

Job cuts at Merck & Co., Borders, Cisco Systems, Lockheed Martin and Boston Scientific accounted for 57 percent of the July total, according to Challenger, making July the first month in seven when the government sector did not shed the most jobs.

"A casual observer certainly might conclude that the wheels just fell off the recovery wagon," said Challenger.

Government and nonprofit profit job cuts still account for the largest share of planned layoffs in the first seven months of the year.

For 2011 so far, employers have announced 312,220 cuts, down 8 percent from the first 7 months of 2010.