Economic Watch: Jobs Growing, Manufacturing Expanding

Private sector employment increased by 237,000 jobs from May to June, according to payroll processor ADP's National Employment Report. That's the biggest gain since last December and the third straight month-over-month improvement.

“The U.S. job machine remains in high gear,” said Mark Zandi, chief economist of Moody’s Analytics. “The current robust pace of job growth is double that needed to absorb the growth in the working age population. The only blemish in the job market is the loss of jobs in the energy sector. Most encouraging is the healthy rate of job growth among the nation’s smallest companies.”

Small business, those with 49 or fewer employees, accounted for just over half the job gains during June.

Goods-producing employment rose by12,000 jobs in June, after adding 11,000 in May. The construction industry had another solid month in June, adding 19,000 jobs, down from 28,000 last month. Meanwhile, manufacturing added 7,000 jobs in June, after losing 2,000 in May.

The May total of jobs added was revised from 201,000 to 203,000.

The report comes before federal job numbers, including unemployment, on Thursday are released for June.

Meantime, a separate report shows economic activity in the manufacturing sector expanded in June for the 30th consecutive month, according to the nation’s supply executives.

The Institute for Supply Management’s Purchasing Managers Index registered 53.5%, an increase of 0.7 of percentage point over the May reading of 52.8%.

A PMI in excess of 43.1%, over a period of time, generally indicates an expansion of the overall economy, according to the group.

The New Orders Index registered 56%, an increase of 0.2 of a percentage point from the reading of 55.8% in May while the Production Index registered 54%, 0.5 of percentage point below the May reading of 54.5%.

Of the 18 manufacturing industries, 11 reported growth in June.

“Comments from the panel indicate mostly stable to improving business conditions, with the notable exception relating to the oil and gas markets. Also noted is the negative effect on egg prices and availability due to the avian flu outbreak,” said Bradley J. Holcomb, chair of the Institute for Supply Management Manufacturing Business Survey Committee.

A separate report on the nation’s manufacturing sector was more sober in its assessment of conditions.

The seasonally adjusted final U.S. Manufacturing Purchasing Managers’ Index from the financial information services provider Markit registered 53.6 in June, down from 54 in May and the lowest reading since October 2013.

Despite the decline, the index remained above the 50 mark that separates expansion from contraction.

The report indicated a slower improvement in overall business conditions across the U.S. manufacturing sector, with softer output growth offsetting a slight pick-up in the pace of new business gains and job creation. The latest survey indicated that subdued export demand remained a key factor weighing down overall new order growth, as highlighted by a fall in new work from abroad for the third month running.

“Investment spending also appears to be waning, with recent months seeing the slowest growth of new orders for business equipment and machinery for two years,” said Chris Williamson, chief economist at Markit. “The investment slowdown suggests companies are becoming more risk averse and cautious in their spending. The current impressive rate of factory job creation could soon likewise wane unless the outlook improves."

He said the good news is that the export and investment drags are being offset by an ongoing surge in consumer spending, which is in turn most likely linked to falling prices in recent months.

“An upturn in growth of new orders for consumer goods helped drive an increase in overall manufacturing orders books during the month, providing a ray of hope that output growth will stabilize at its current modest pace,” Williamson said.