Small Business Hiring Leads Positive June Jobs Report

National private sector employment data released Thursday reports nonfarm jobs gains of 157,000 from May to June, with small business hiring leading the way.

Businesses with less than 50 workers hired 88,000 new workers in June—according to an ADP National Employment Report report—more than the entire jobs growth registered in May.

New jobs in May were just 54,000, and led many economists to begin talking about the possibility of a double dip recession.

The new report offers hope that the unemployment rate will hold steady or even decline slightly after a couple of months of disappointing numbers.

According to Joel Prakken, chairman of Macroeconomic Advisers, LLC, the company which produces the report for ADP, the data, “suggests that employment growth, which had slowed sharply in May, rebounded in June to a pace that should prevent a further increase in the unemployment rate.”

The numbers are nearly twice as high as “consensus economists” predicted, Prakken said in a statement.
Medium-size businesses, (with between 50 and 499 workers) hired 59,000 new workers. Large companies, those with more than 500 workers, added 10,000 employees.

Divided by sector, the largest gains are coming from the services, with 130,000 new jobs in June, nearly three times faster than growth in May.

Growth in goods-producing sectors were up by 27,000, and manufacturing employment rose by 24,000 new jobs, completing a growth trend in seven out of the last eight months.

Employment in construction dropped 4,000 in June. ADP measured a loss of 2,124,000 jobs since its peak in January 2007, explained by the frantic home building bubble, which collapsed during the financial crisis.

Jobs in financial services were also down 3,000 in June, bringing the total loss in that sector since January of 2007 to 686,000.

ADP’s report is widely considered to be a good advance indicator of what the Bureau of Labor statistics will release. The government plans to release its data on Friday, and it is expected to be similar.

Employment plummeted beginning in January 2008 and didn’t start to improve until one and a half years later. Unemployment rates have been fairly steady since then, showing little change.

About 8 million jobs have been lost since the recession, and just 2 million have been recovered.

Most economists are watching hiring in the private sector for signs of a turn in the economy, and a real recovery.

Alan Tonelson, an author and research fellow at the U.S. Business and Industry Council, is concerned that jobs calculations by ADP and the Bureau of Labor distort the outlook, and misrepresent the number of private sector jobs created.

He does not believe that highly subsidized jobs, such as health care, education, and social services, should be counted as private sector jobs. According to his calculations, published in a Bloomberg op-ed, only 291,000 real private sector jobs have been regained since the recession.

While the new June jobs figures are better than expected, the number is still too low or may just barely be enough to accommodate new people entering the work force. Federal Reserve Chairman Ben Bernanke has said frequently that a growth in the economy of 2 percent to 2.5 percent is needed to “materially reduce the unemployment rate.”

GDP is currently stuck just below 2 percent.

Bernanke has predicted that the nation’s long-term weak economic outlook will likely lead to years with high levels of unemployment, before things begin to change significantly.

Nearly 14 million Americans are currently unemployed, according to the U.S. Bureau of Labor Statistics.