June ADP Employment, ISM Non-Manufacturing, Auto Sales, UI Claims

U.S. Jobs Data Looks a Little Bit Firmer, Elsewhere Not So Much

  • The ADP Employment Report for June showed an increase of 176,000 private sector jobs.
  • The June ISM Non-Manufacturing Survey’s Purchasing Managers’ Index fell to 52.1 percent.
  • Auto sales for June ticked up to a 14.1 million unit annual rate, supported by fleet sales.
  • Initial Claims for Unemployment Insurance fell by 14,000 for the week ending June 30, to 374,000.

U.S. labor market data took a step in the right direction in June, according to the ADP Employment Survey, which showed a net increase of 176,000 private-sector jobs for the month. According to ADP, small firms, with less than 50 employees, continue to do the bulk of the hiring, having added 93,000 jobs in June. Medium sized firms, with 50 to 499 employees, added 72,000 jobs. Large firms added 11,000 jobs for the month. Total government employment has declined by an average of 9,000 jobs per month from March through May. Subtracting 9,000 government jobs from the ADP private-sector gain of 176,000 provides an estimate of a 167,000 job gain for tomorrow’s official Bureau of Labor Statistics data release for June. This is well above our previous estimate of 110,000 jobs for June, implying some upside risk to that forecast. The moderately stronger jobs numbers for June are matched by a better unemployment insurance number for the end of June. For the last week of June initial claims for unemployment insurance fell by 14,000 to hit 388,000. Claims numbers are expected to improve through July as auto makers take shorter-than-normal summer breaks.

Auto sales remain well above their recession lows, but really have not improved since the end of 2011. June auto sales increased to a 14.1 million unit annual rate, up from May’s 13.7 million unit rate, but remain just below this January’s 14.2 million unit rate.  On the plus side for auto sales is ample pent-up demand, low interest rates, deleveraged households and falling gasoline prices. On the minus side is lackluster job creation, falling consumer confidence through June, and foreboding about Europe, Asia and the U.S. Fiscal Cliff. The non-manufacturing economy of the U.S. is still expanding, but at a slower rate, as shown by the ISM Non-Manufacturing Survey for June, which showed the non-manufacturing index falling to 52.1 percent, still positive but trending down from February’s recent peak. As reported earlier, the ISM’s Manufacturing Index for June fell into contraction territory, just below 50.0 percent, to 49.7 percent. The employment sub-index for the non-manufacturing survey remains positive at 52.3 percent while the employment sub-index for the manufacturing survey is even stronger at 56.6 percent. Both ISM surveys point to firming job growth this summer after a springtime slump. Stronger job growth in June and July would be a visible indication of sustained momentum for the U.S. economy, amid gathering global gloom. The European Central Bank and the Peoples Bank of China both took steps today to dispel that gloom. The ECB cut its benchmark lending rate to a historic low of 0.75 percent while the PBOC cut interest rates for the second time in less than a month. The one-year yuan lending rate is now down 6.0 percent, effective Friday. The PBOC is also engaging in open-market operations designed to ramp up liquidity, signaling its concerns about slower economic growth.

Market Reaction: U.S. stock markets opened with losses. Treasury yields are down. NYMEX crude oil is up to $87.85/barrel.  The dollar is up against the euro and the yen.

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