Today’s ADP Employment Report for July isn’t really encouraging but it does tell us that there’s still job growth. It’s modest at best, but the fact that the labor market is still expanding at this point suggests that the economy will sidestep a new recession. There’s no assurance that the labor market won’t suffer in the months ahead, but the latest numbers don’t look like recession figures.
Private nonfarm payrolls added a net 114,000 positions last month, ADP advises. That’s down slightly from June’s 145,000 gain and so there’s nothing much has changed in the labor market. Growth is still sluggish. But 100,000-plus new jobs implies that there’s still enough forward momentum in the broad trend to keep the economy bubbling, if only slightly. The margin for error is thin, but it could be a lot worse.
Today’s ADP number also suggests that Friday’s employment report for July from the Labor Department will be an improvement over the government’s June estimate, which was unusually disappointing, even by the diminished standards of recent history. As the second chart below shows, the last two ADP monthly figures have printed comfortably above the government’s numbers. The two series wander quite a bit relative to each other on a monthly basis, but there’s a fairly tight correlation through time and so the Labor Department’s estimate may be set to play catch-up with the ADP report.
The consensus forecast for Friday’s jobs report expects as much with a prediction of 100,000 new private-sector jobs for July vs. June’s 57,000 gain, according to Briefing.com.
Even so, some analysts warn that the risk of a new recession is rising. “This economy is really balanced on the edge,” Harvard University economics professor Martin Feldstein, a member of the Business Cycle Dating Committee of the National Bureau of Economic Research, tells Bloomberg. “There’s now a 50 percent chance that we could slide into a new recession. Nothing has given us much growth.”
Morningstar economist Francisco Torralba puts a slightly more nuanced spin on the risk, telling TheStreet.com: “We are in a process of discovery over whether the slowdown we have seen since March in the U.S. is over and we are entering a new phase of faster growth or that we are in a slump.”
The discovery process remains fluid, but at least the ADP number keeps hope alive. Next up: Let’s see if tomorrow’s jobless claims report can build on last week’s encouraging news.