U.S. ADP Employment Gain is Strongest Since 2012

Employment growth picked up steam last month. The ADP/Moody's National Employment Report indicated a 281,000 rise (2.1% y/y) in June nonfarm private sector jobs. It was the firmest rise since November 2012 and followed unrevised increases of 179,000 and 215,000 in May and April. During the last three months, job increases averaged 222,000, below the peak of 259,000 in February of 2012. The June job gain beat the 205,000 rise expected in the Action Economics Forecast Survey. During the last twenty years there has been a 95% correlation between the monthly ADP job gain and the rise in private sector nonfarm payrolls.

The ADP survey is based on ADP's business payroll transaction system covering 406,000 companies and roughly 23 million employees. The data are processed by Moody's Analytics Inc., then calibrated and aligned with the BLS data. Extensive information on the methodology is available here.

Service-producing payrolls led the job gains with a 230,000 increase (2.1% y/y). Jobs in professional and business services increased 77,000 (3.3% y/y); transportation and utilities employment grew 50,000 (2.0% y/y) while financial activities headcount gained 11,000 (0.5% y/y). Goods-producing payrolls rose 16,000 (2.0% y/y). Factory sector payrolls gained 12,000 (0.8% y/y), the strongest rise since December. Construction payrolls jumped 36,000 (4.0% y/y), the firmest rise of the expansion.

Hiring amongst small businesses totaled 117,000 (2.1% y/y). Medium-sized firms' payrolls advanced 115,000 (1.8% y/y) while jobs at large-size companies rose 49,000 (2.6% y/y).

The ADP National Employment Report data are maintained in Haver's USECON database; historical figures date back to March 2001. The figures in this report cover jobs only in the private sector. The expectation figure is available in Haver's AS1REPNA database.

Monetary Policy and Financial Stability is today's speech by Fed Chair Janet L. Yellen and it is available here http://www.federalreserve.gov/newsevents/speech/yellen20140702a.htm

New orders to all manufacturers declined 0.5% (+2.4% y/y) in May following a 0.8% increase during April, revised from 0.7%. A 0.3% decline was expected in the Action Economics Forecast Survey. A 0.9% decline (+2.9% y/y) in durable goods orders led the total lower. Factory sector orders excluding transportation equipment dipped 0.1% (+3.0% y/y) after three months of firm increase. Orders for nondurable goods (which equal shipments) fell 0.2% (+2.0% y/y) and these orders have been moving sideways all year. Shipments from chemical plants were off 1.0% (-2.9% y/y) while textile mill shipments declined 0.6% (+2.2% y/y). Shipments of plastics & rubber rebounded 0.6% (3.4% y/y).

Inventories in the factory sector firmed 0.8% (3.8% y/y), the strongest gain since October 2011. In the durable goods sector, inventories rose 0.9% (5.4% y/y) led by a 2.2% rise (4.8% y/y) in computers & electronic products. Amongst nondurable goods industries, inventories increased 0.6% (1.4% y/y). The gain was paced by a 2.1% jump (24.2% y/y) in apparel, a 1.5% improvement (6.6% y/y) in printing and a 1.5% increase (4.4% y/y) in petroleum inventories. 

Unfilled orders increased 0.6% (7.9% y/y), strong for the third consecutive month. Excluding the transportation sector, order backlogs rose 0.5% (5.8% y/y). Backlogs of electrical equipment gained 1.1% (10.3% y/y) and unfilled orders of transportation equipment improved 0.7% (9.2% y/y). Unfilled orders of furniture rose 0.6% (4.5% y/y) while backlogs in the machinery sector also rose 0.6% (11.3% y/y).

The factory sector figures are available in Haver's USECON database.