ADP reports private sector surpasses expectations with addition of 324,000 jobs in July

Private sector companies exceeded expectations by adding a significant number of jobs in July. The surge was primarily driven by the leisure and hospitality industry, according to a report released by payroll processing firm ADP on Wednesday.

The total job gains for the month amounted to 324,000, with a substantial increase of 201,000 in hotels, restaurants, bars, and related establishments. These figures surpassed the Dow Jones consensus estimate of 175,000, although it represented a decline compared to the revised 455,000 jobs added in June.

This report reaffirms the strength of the U.S. job market, despite the Federal Reserve’s efforts to slow down the economy and combat inflation.

“The economy is performing better than anticipated, and a robust labor market continues to drive household spending,” said Nela Richardson, ADP’s chief economist. “Although wage growth has slowed down, we have not observed widespread job losses.”

During the month, service-related industries dominated job creation as the economy transitioning from being goods-oriented during the early stages of the Covid pandemic. The service sector accounted for 303,000 jobs.

In addition to the notable growth in leisure and hospitality, information services added 36,000 positions, trade, transportation, and utilities grew by 30,000, and the other services category, which includes dry cleaning, housekeeping, and similar services, contributed 24,000 jobs.

On the other hand, the goods-producing sector only added 21,000 jobs, with natural resources and mining showing an increase of 48,000 but an unfortunate loss of 36,000 jobs in manufacturing. Construction accounted for the remaining 9,000 jobs.

The ADP report also highlighted a year-on-year wage increase of 6.2%, surpassing the long-term pace but representing the slowest growth since November 2021.

While the ADP report provides valuable insights, the market eagerly awaits the nonfarm payrolls count from the Bureau of Labor Statistics within the Labor Department, which is set to be released on Friday. These figures can significantly differ, as was the case in June when ADP’s total jobs added of 455,000 significantly exceeded the BLS’s count of 209,000.

Throughout the first half of this year, ADP averaged 256,000 jobs added per month, slightly lower than the BLS’s average of 278,000. Market expectations for the official government report in July stand at 200,000 jobs.

Noteworthy from the ADP report is the concentration of job gains in firms with fewer than 50 employees, which contributed 237,000 positions. Companies with 50 to 499 employees added 138,000 jobs, while larger firms experienced a loss of 67,000 jobs.