US companies saw a massive, unexpected spike in hiring activity in June, according to private payroll processor ADP’s latest employment report, released Thursday morning.
ADP’s National Employment Report, produced in a collaboration with the Stanford Digital Economy Lab, showed that the private sector added 497,000 jobs last month, far exceeding economists’ expectations for 228,000 jobs and ADP’s May total of 267,000 hires.
While ADP’s tabulations don’t always correlate with the official federal jobs report, it’s sometimes viewed as a proxy for overall hiring activity. And by that measure, Thursday’s blockbuster jump is yet another indicator that when the June jobs report lands on Friday, it’s all but certain to show that the US labor market has added jobs for 30 consecutive months.
While the current employment growth pales in comparison to the labor market expansion seen between 2010 and 2019, when there were a record 100 months of job growth, it’s the strength of this current streak that continues to defy expectations: The above-average gains come at a time of elevated, but waning, inflation as well as a historic spike in interest rates resulting from a Federal Reserve counteroffensive to rising prices.
The 1.57 million jobs added so far this year mark the 10th highest January-to-May total in records that go back to 1939, Bureau of Labor Statistics data shows. And this year’s monthly average of 314,000 net job gains far exceeds what was seen before the pandemic, including during that 100-month stretch post-Great Recession.
Still, some economists believe that it’s only a matter of time before the weight of those and other external factors will be too much for employers to handle.
Sarah House, senior economist at Wells Fargo, said she’s expecting a “gradual cooling” to wash over the labor market.
“The jobs market is not collapsing,” she said. “But as we get further away from the [pandemic] reopening, the impact of tighter monetary policy increasingly bites. We do look for the job gains to continue to ease on trend.”
Economists expect that June’s job gains will be lower than that average and also down from the 339,000 jobs added in May. Consensus estimates are for a net gain of 225,000 jobs last month, according to Refinitiv. (Nevertheless, the 82 forecasts from economists that make up that consensus vary widely — from 110,000 to 288,000 jobs).
The unemployment rate is expected to dip to 3.6% from 3.7%, according to the Refinitiv estimates, which range from 3.4% to 3.8%.
Data-heavy Thursday
Economists’ crystal balls could become far less opaque by midday Thursday.
The timing of the Fourth of July holiday resulted in a load of labor market data landing within 24 hours of the government’s monthly jobs report. During typical months, reports such as the BLS’ Job Openings and Labor Turnover Survey (JOLTS) and payroll processor ADP’s private-sector payrolls survey are released on Tuesdays and Wednesdays, respectively, giving economists and the markets time to digest key indicators.
Instead, ADP released its report minutes before the weekly jobless claims were published. JOLTS is set be released 90 minutes thereafter.
Consensus estimates for ADP’s report are for 228,000 net job gains in the private sector during June, according to Refinitiv estimates, which have an even wilder range of 95,000 to 334,000 jobs. The actual tally for June of 497,000 jobs added, however, blew those estimates out of the water.
The bulk of the gains came from service industries, specifically leisure and hospitality businesses, according to ADP. However, there are indications that hiring activity may be peaking, noted Nela Richardson, ADP’s chief economist.
“Wage growth continues to ebb in these same industries, and hiring likely is cresting after a late-cycle surge,” she said in a statement.
For JOLTS, economists expected US job openings in May dropped slightly to 9.94 million, from 10.1 million in April.
In May, job openings fell to 9.82 million, dropping from an upwardly revised 10.3 million in April, according to the BLS’ latest JOLTS report.
The May JOLTS data showed that the number of new hires rose to 6.21 million from 6.1 million, quits jumped up to 4.02 million from 3.77 million and layoffs dipped to 1.56 million from 1.59 million.
