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ADP Could Show the Addition of 235,000 Private Payrolls in July

H.S. Borji
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www.finances.com
ADP Could Show the Addition of 235,000 Private Payrolls in July

The ADP Institute could show Wednesday the US economy added 235,000 private payrolls in July, following a gain of 281,000 the previous month that was the largest in more than two-and-a-half years.

The 235,000 estimate is based on a survey conducted by Bloomberg News. A separate survey conducted by Capital Spectator predicts private payrolls to increase 271,000.

The ADP national employment report is released on a monthly basis, usually a few days before the government’s nonfarm payrolls report. The monthly indicator is calculated using a subset of the ADP’s records, which represent 400,000 US business clients and 23 million US private sector employees.

On Friday the Labor Department will provide a more complete picture of the employment situation. The official government tally is expected to show the creation of more than 230,000 nonfarm payrolls in July, following a gain of 288,000 the previous month. That would mark the sixth consecutive month US employers added more than 200,000 payrolls, a sign the economy was on its way to full recovery after a soft patch in the first quarter.

The unemployment rate is forecast to remain unchanged at 6.1 percent.
Average hourly earnings – a gauge of labour cost inflation – is forecast to rise 0.2 percent, following a similar increase the previous month.

Year-on-year, growth in average earnings has fluctuated around 2 percent since the end of the recession.

An article published Tuesday by finances.com suggests the 2014 trajectory for job growth will extend through July.

“The 2014 trajectory for job growth should extend through July, thanks to a lift from factory output producer sentiment and claims,” wrote David Becker in Tuesday’s article entitled, “Employment Growth Remains Solid But Wage Growth is Moderate.”

“The median expectations of a 270K July nonfarm payroll gain exceed the 208k average increase of the past twelve months, though it sits below the 272k average gain of Q2.”

The US dollar, buoyed by speculation the Federal Reserve will consider raising interest rates earlier than previously assumed, could use the jobs reports to springboard to new highs in the second half of the week.

However, the greenback’s advance could be held in check by disappointing GDP figures. The Commerce Department on Wednesday will release an initial estimate of second quarter GDP growth. Economists in a Bloomberg survey expect the US economy accelerated at an annual rate of 3.1 percent between April and June.

Traders should take the first GDP report with a grain of salt, as initial estimates are known to be volatile due to incomplete data. As an example, the Commerce Department’s initial estimate of first quarter growth suggested the economy expanded at an annual rate of 0.1 percent.

The second estimate, based on more complete data, showed the economy actually contracted 1 percent year-on-year.

The final estimate, which was released in June, showed the US economy contracted an annual rate of 2.9 percent in the first quarter.

The Federal Reserve at its June policy meetings downgraded its forecast for economic growth this year. According to the revised estimate, the US economy will grow between 2.1 percent and 2.3 percent this year, down from a previous estimate of nearly 3 percent.

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